You may come across insurance policies when planning for travel, long-term care, self-employment and in other personal or professional situations. These types of policies can give you peace of mind and help protect you from unknown financial risks.

Common types of other insurance include:

• Umbrella liability insurance
• Disability insurance
• Long-term care insurance
• Business liability insurance
• Rental car insurance
• Travel insurance
• Extended warranties
• Other vehicle insurance

Umbrella liability insurance

An umbrella insurance policy is one that covers your financial liability for a wide range of accidents and scenarios, though usually only after other insurance has paid a portion of the claim. As an example, let's say your auto policy has a liability limit of $150,000. If someone sued you for injuries from an accident and you were held liable for $500,000 in damages, your auto policy would cover the first $150,000 and the umbrella policy would pick up the rest (assuming it was large enough, and the circumstances weren't excluded from policy coverage).

If you maintain minimum liability coverage on your car and home, you can purchase an umbrella liability policy to pick up where the other insurance coverage left off. For this reason, an umbrella policy is typically purchased from the same insurance company that covers that stuff. An umbrella policy may also cover things that you just don't have other insurance for. An example for some policies is volunteer work with a non-profit organization, but this is very specific to the policy.

Because umbrella policies pay out only in somewhat unusual cases, they're relatively cheap — they can cost a few hundred of dollars per year. They're sometimes criticized as being wasted money, because they're so unlikely to pay off.

Umbrella policies are insurance to manage a type of risk, but they aren’t investments. Typically you want to have an insurance policy for everything you want to cover — your home, your car, your life and your health. Umbrella insurance shouldn’t be a replacement for those lines of coverage. Umbrella insurance really only helps you if you are at fault in some type of injury-causing accident where you could be held liable for substantial damages — hundreds of thousands or more dollars.

If you tend to engage in risky activities, then you might want umbrella insurance for peace of mind. Realistically, it is unlikely that you will need it — unless you have substantial assets that you want to protect in case you think you could be the target of a lawsuit.

• See also: Car insurance, Homeowner’s insurance, Renter’s insurance, Health insurance, Life insurance

Disability insurance

Disability insurance is an insurance plan that makes regular payment (usually monthly) to replace income lost when illness or injury prevents the insured from working. This type of insurance is frequently referred to as income protection because coverage compensates workers for loss of income resulting from serious illness or injury.

Based on the numbers, disability is more likely to happen than "early death," but fewer people buy disability insurance than life insurance. If you don't have insurance and you aren't covered by something like worker's compensation (which covers work-related injuries), you'll need to cover your expenses until you recover. In some cases, a disability it such that it could mean permanently stopping work — Social Security may kick in, but it's often inadequate to cover your expenses. This type of insurance can be pretty expensive but if you're concerned with the risk of an extended illness, it's something to consider.

• See also: Social Security and Medicare

In general, there are two types of disability insurance: short term and long term. Short-term disability insurance provides benefits for up to two years. For periods over two years and up to retirement, people need long-term disability insurance.

Disability coverage requires a waiting period. Benefits don’t begin the day you’re disabled. The waiting period may be 30-180 days. The longer the waiting period, the lower the premium. During this time, you could be on sick leave from work or collecting regular pay. Disability benefits begin after the waiting period and end as soon as you can return to work.

Group disability insurance plans are generally the least expensive option, but are usually provided by your employer, and in many cases, the employer pays for part or the entire plan. However, the insurance is good only as long as you work for the company. When you leave, you lose all policy rights.

Long-term care insurance

Long-Term Care Insurance (LTCI) provides for a person's care in cases of chronic illness or disability. Policies for LTCI provide insurance coverage for times when an individual cannot independently manage the essential activities of daily living. These are universally known as feeding, dressing, bathing, toileting and walking, as well as moving oneself from a bed to a chair (transferring). Both physical and mental disability qualifies for long-term care insurance coverage if they limit an individual's ability to perform daily functions.

The purpose of LTCI is to provide coverage for a succession of caregiving services for those who are elderly, chronically ill, disabled or seriously injured. This care may be provided in skilled nursing or assisted living facilities or mental hospital or at home where a nurse or nurse’s aide provides care.

Keep in mind that you can only buy LTCI at a reasonable rate when you have no obvious signs of being a high-risk case for needing it. It’s generally only possible to get LTCI before diagnosis of an illness or condition that will require long-term care. It's unusual to purchase LTCI early in life, but you might want to do so if you're aware of conditions in your family that you believe make you more likely to need extended care in a nursing home or similar facility.

Long-term insurance is a serious financial investment and should be considered a part of longer-term estate planning. A qualified, independent professional should be consulted to review the policy before purchase. The State Health Insurance Assistance Program (SHIP) is also available to answer questions.

• AARP Guide to Long-Term Care:
  www.guidetolongtermcare.com/aarp.html

Business liability insurance

If you're self-employed or own a small business, you may need business liability insurance. If you don't have adequate insurance for the type of business you're in, it's possible that people may be able to go after your personal assets to satisfy a claim against the business (even if you've formed an LLC or corporation). Before you purchase a policy, consult an attorney in your area who specializes in small business.

• See also: Self-employment

Rental car insurance

Before you rent a car, check your primary car insurance policy if you own a vehicle. Also read the policy of the credit card you will use to rent the car. Both types of policies frequently cover rental cars, so you don’t need to pay the extra charge to the rental agency. If you don’t own a car and don’t have coverage with your credit card, you may want to purchase the policy.

Coverage may not apply in cases where you will be driving overseas, so check with your insurance agent and credit card company to see if you are covered. In many cases, your U.S. car insurance policy is not valid — including in Canada and Mexico. If you don’t have international coverage, you may want to add extra car insurance to be fully protected.

Travel insurance

Unless you are buying an extremely expensive travel package or planning on high-risk adventure travel, you may not need travel insurance. It can tack on several hundred dollars in extra fees that you won’t use. Before you buy travel insurance, check to see if your health insurance will cover you if you travel outside of the United States. If you are going to be doing high-risk adventure travel and your health insurance won’t cover you, you might be able to get specific adventure travel related policies. If you’re traveling to remote areas, that also might be a case where you’d want to purchase travel-specific insurance.

• See also: Planning a vacation

The advertising section of travel and adventure magazines (usually in the back) typically lists some insurance agencies. It’s a good place to start looking if you think you are at risk and need a travel policy.

For more information on travel insurance, see:

• Travel insurance review: www.travelinsurancereview.net
• Insure my trip: www.insuremytrip.com

Extended warranty insurance

Consumer products — such as flat screen televisions and computers — usually offer extended warranties. This is a type of insurance that covers your new purchase against damage — but there are lots of exceptions, so read the fine print. Generally, extended warranties are expensive and don’t really benefit you. We don’t recommend taking out the policy unless you tend to have more high-risk usage.

Other vehicle insurance

If you have a boat, motorcycle, plane or other vehicle, you most likely want to insure it. The best place to check for coverage options is with the agency you use for your home or car insurance. Always make sure the policy you purchase includes adequate liability coverage — it may be required, but that’s not always the case.

Words to know

Unsure about something you read? Many of the financial terms you came across in this article are defined in our financial glossary. A-Z Glossary

Links we like

Here are a couple online features you might find useful:

• Health Insurance Association of America: www.hiaa.org
• Administration on Aging's Ombudsmen Program: www.aoa.gov
• AARP: www.aarp.org