Insurance can be confusing. But when you know the basics, it can be a lot less intimidating.
In general, insurance is an agreement between you and an insurance company.
You pay a premium based on the kind of insurance you’re buying, and in return, the insurer provides financial protection if you face a covered event—like getting sick or getting into a car accident.
There are many different types of insurance that offer different kinds of benefits, which we’ll be discussing here.
1. Health Insurance
Health insurance is a type of insurance that helps pay for medical care, hospitalization, and other health-related expenses. Health insurance can be purchased by individuals, families, or businesses on their own.
Health insurance plans are designed to help pay for medical expenses not covered by the basic benefits package offered by your employer.
These might include things like co-payments or deductibles (the amount you must pay out-of-pocket before your health plan coverage kicks in), prescription drug coverage, vision care, and dental care (if they’re considered medically necessary).
2. Car Insurance
Car insurance is a type of insurance that protects you against the financial risk of 1) physical damage to your car or other vehicles or 2) legal liability that results from damaging someone else’s property or injuring someone else.
In order to be considered properly insured, you must have both liability coverage (the part of your policy that pays for injuries or damages you cause others) and comprehensive and collision coverage (the parts that pay for damage to your car).
In addition, if your vehicle is financed through a loan or lease agreement with a lender or dealer, they may require additional coverages such as GAP (guaranteed auto protection) or disability benefits.
3. Travel Insurance
Travel insurance is a type of insurance that covers unexpected events during your trip. If you get injured or sick, travel insurance can help pay for medical expenses and lost luggage.
It’s also good to have in case something happens and you can’t complete your trip. Many people purchase travel insurance just before they leave on their trips, but it can also be purchased before or after the trip as well.
Travel insurers offer coverage through different plans, and prices may vary based on which plan you choose and how many activities are included in the policy.
For example, some policies only cover certain activities (like skiing), while others will cover any activity that might be dangerous (rock climbing).
Some policies only cover specific countries, while others may provide worldwide coverage at an additional fee above standard rates.
4. Life Insurance
Most people think of life insurance as a contract between an individual and an insurance company. The individual pays premiums over a period of time, and when they die, their beneficiaries receive benefits from the policy.
Life insurance is often needed to cover financial obligations such as mortgages, loans, and college tuition for surviving family members.
Most policies will pay out in one lump sum or spread out over time (this is known as paid-up term life).
After that period ends, any unpaid balance becomes a nonforfeitable asset for your beneficiaries to claim upon your death.
5. Homeowners Insurance
Homeowners insurance protects your home, its contents, and the land it stands on. If someone is injured in your house or if a fire damages your home, this policy will cover it.
You may also need to consider additional coverage for other types of personal property that aren’t included in standard homeowner policies.
For example, if you have valuable jewelry or artwork at home, these items will most likely require separate coverage from a separate policy.
If you rent out rooms in your house as an Airbnb host (or any other form of short-term rental), then renters insurance may be required by law in addition to homeowners insurance.
6. Renters Insurance
Renters insurance is a type of coverage that protects your personal belongings and liability in the event that they are damaged or stolen.
In general, the more items you own and the higher their value, the more important renters insurance becomes.
You should also consider what kind of condo or apartment complex you live in.
If it’s located in an area that experiences frequent flooding or other natural disasters, then you may need more extensive coverage than someone who lives in an area without these risks.
Insurance is a method of risk management that comes in many forms, each designed for a specific purpose.
It’s a way to protect yourself against financial loss or anything else that could have an adverse effect on your life.
You can insure yourself against anything from car accidents and property damage to medical bills and tax liability. If you want advice on which is the right insurance to get for your needs and lifestyle, it’s best to seek a financial advisor.