Various Types of Insurance
When the unexpected happens, do you have a plan of how you would handle the situation? Unfortunately, many people do not have any idea of what they would do should a disaster strike, and this can be financially devastating. Accidents can and will happen, and no one is safe from them. One of the most important financial decisions one can make for their family is to purchase insurance coverage; however, there are various types of insurance to choose from. There is insurance coverage for practically any accident or disaster one can think of. So, what people need to do is look at their individual circumstances to decide which insurance is needed and why. People work hard to keep food on the table and a roof over their heads, so it makes sense to insure some of the most important things in life.
The bottom line is that insurance has to exist to protect people from risks. No matter one's income level or state where they live, no one is immune from risk. At any time, people all over the world are victims of things such as fires, theft, illness, accidents, severe weather and much more. (Super Pages, 2014) These incidents can happen anytime and anywhere. The idea of insurance goes back hundreds of years and is something that has been used since the beginning of time in one way or another.
Several types of insurance to choose from
Many people are still unaware of how many different types of insurance coverage that is available to consumers. Below are some different types of insurance that will be covered in this article, but keep in mind that there are many different types to choose from, no matter what needs to be protected.
Accident or sickness insurance
In addition, there are also many different types of miscellaneous insurance coverage that is available to consumers such as kidnapping insurance, legal insurance, pet insurance, travel insurance, and much more. Keep in mind that even though there are several different types of insurance to choose from, you don't need them all. There are many types of insurance that is wrong for certain people. Make sure you use your money wisely and that the insurance purchased will actually help your financial situation instead of paying out high monthly premiums.
Pros and cons of purchasing insurance
When it comes to purchasing insurance, there are pros and cons; however, do keep in mind that the pros greatly outweigh the cons. It is important to purchase insurance that will protect you, your family members and/or possessions, because there any some types of insurance that will unnecessarily drain your savings. Insurance is one of the most important things you can invest in because it will protect you from risk, and everyone is prone to some type of risk at some time in their lives. Always remember that no one is immune.
Protect people, home, other possessions
Protect your finances
Unnecessary coverage. There are many types of insurance that is not needed, or you can have too much or not enough coverage.
Having to keep up with premium payments.
How exactly does insurance work?
Once you have decided what you need to insure, it is important to meet with an insurance agent so they can talk with you about all the different options and coverages available. Coverage will depend on what state you live in, whether you rent or own your home, whether you own a car and much more. Basically, insurance helps people to recover from certain types of financial consequences by pooling the resources of a large group to pay for the losses of a small group. (Super Pages, 2014)
Everyone who purchases insurance coverage will have to pay premium payments in order to keep the coverage. The amount of one's premium payment is dependent on many things such as age, gender, where they live, health, occupation, and much more, depending on the type of insurance they are seeking. These premium payments is will cover any anticipated losses. The insurance company uses this money to pay any claims that may arise from any of their customers. So, the losses and expenses are shared by everyone. (Insurance Institute of Michigan, 2014)
Insurance companies use all types of statistical analysis to project what actual losses will be in any given group. (Pareto, n.d.) For example, when it comes to auto insurance, a customer's rates will all depend on their driving record. The better the driving record, the better the rates, and this is one of the many things that the insurance company is going to look at. The insurance industry is well versed in all the many areas, including how much money to set back in order to pay the claims, while being profitable at the same time.
Once you have decided which insurance coverage you need, a policy will be drawn up. This policy is a legal and binding contract. It is important to take the time to read all of the fine print and to make sure that you understand exactly what you are purchasing. Should you have any questions, be sure to ask your insurance agent before signing all of the paperwork. Since this is a legal contract, once it has been fully executed, it cannot be changed.
Common basic insurance terminology
Below is a list of common terms used in the insurance industry (National Association of Insurance Commissioners, n.d.):
Insurer – This is the insurance company.
Insured – This is the customer that pays the premium and will be compensated for any loss that is covered under their insurance contract.
Bound – This is the term that is used once all parties have agreed to the terms in the insurance contract and it is in place.
Rider – This is an amendment, or attachment, that alters the insurance policy's terms.
Adjuster – A person who investigates any claims made and recommends settlement options. Many times, both the insurance company and the customer(s) involved will use their own adjuster and then they will all work together to agree on a fair settlement.
Agent – A person who sells insurance through a large insurance company.
Deductible – This is a portion of the loss that the insured needs to pay. For example, some common deductibles are $500, $1,000, and more. In theory, the higher deductible an insured has the lower premium they will pay.
Effective Date – This is the date the policy goes into effect.
Lapse – Termination of a policy due to missed premium payments.
Policy Period – This is the time period which the insurance is in effect. Normally, this is for six (6) months at a time.
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