The Ultimate Guide To Buying Insurance: Buying insurance can be a confusing process. There are so many different types of coverage and different providers to choose from. And since no one likes the thought of getting hurt or sick, it’s easy to put this task off for another day. But putting it off could end up costing you much more in the long run. If you fail to invest in your future by acquiring the right type and amount of insurance, you may have to deal with some serious consequences further down the road: High premium payments, bankruptcy, or even foreclosure on your home. Fortunately, knowing what kind of insurance you need and buying it aren’t as scary as they sound. In this guide, we’ll break down exactly what kinds of insurance you need to consider buying and explain why now is the time to do it.
What Is Insurance?
Insurance is a financial contract between the policyholder (you, the buyer) and the insurance company. In exchange for paying a monthly or yearly premium, the insurance company agrees to pay a specified amount in the event of an accident, death, or specified illness. While the policyholder is healthy, they are the “insured” and the insurance company collects money from them in the form of a premium. In the event that the policyholder becomes sick or is injured, the insurance company pays them a specified amount. Insurance can be thought of as buying peace of mind. Rather than paying for every medical bill and every car accident yourself, you can pay a monthly premium to the insurance company to contribute towards these costs. If you get into an accident, you don’t have to worry about taking out a loan to cover the costs of the repairs. If you get sick, you won’t have to sell off your belongings to pay your hospital bills.
Life insurance is a contract between you and an insurance company, in which you make regular payments to that company in the form of a monthly premium. In exchange, they’ll pay a designated amount to your beneficiaries upon your death. Depending on the type of policy you purchase, this payment could be a one-time payment or a regular payment. If you have a family that depends on you financially, life insurance is an essential purchase. Because death is inevitable, life insurance ensures that your loved ones aren’t left without a source of income. There are two types of life insurance policies: term and permanent. Term life insurance is much cheaper than permanent life insurance. That’s because the company isn’t making any promises to pay out a certain amount upon your death—if you die within the term of your policy, they don’t have to pay out. Permanent life insurance is more expensive because the insurance company has to honor the contract and pay out a specified amount even after you die. It’s important to make sure you have enough life insurance to cover your household’s financial obligations in the event of your death. You’ll want to cover your current mortgage payments, provide for your spouse and any children you might have, and pay off any debts you owe.
Health insurance is a contract that you sign with an insurance company. You make regular monthly or yearly payments to the insurance provider, and they in turn agree to pay a specified amount towards the cost of your medical bills. If you’re unable to pay your medical bills, the insurance company is responsible for doing so. There are two major types of health insurance policies: prepaid and reimbursement. With a prepaid health care plan, you pay a lump sum of money upfront. The insurance company then agrees to pay for all of your future medical bills, no matter what. These plans are generally only recommended for people who have a significant amount of money. With a reimbursement plan, you pay a monthly or yearly premium, and the insurance company agrees to pay for a certain amount of your medical bills. With both types of health insurance, the more coverage you have, the more you’ll have to pay for your premiums. Make sure you have enough coverage to cover the cost of any serious medical issues you might face in the future.
Auto insurance is a contract that you enter into with an insurance company. You make regular payments and in exchange, they agree to pay a specified amount to cover any accidents that you cause. Most states require you to have some form of auto insurance. If you’re caught driving without insurance, you’ll be fined and given a license suspension. If you cause an accident without insurance, you’re liable for all damages. You’ll have to pay out of pocket for any medical bills, lost wages, and car repairs caused by your accident. With auto insurance, you’re protected from these losses. There are several types of auto insurance policies you can purchase. A liability only policy covers any damages you cause to another driver or their car. Coverage for your own car is optional (or sometimes required). Comprehensive and collision coverage cover damages to your own car. Health insurance policies are slightly different from state to state. Generally, health insurance policies only cover you if you’re in an accident that’s not your fault.
Umbrella/Excess Protection Insurance
Umbrella insurance policies are meant to cover you in the event that your other insurance policies don’t deliver enough coverage. If you have a mortgage on your home, you’ll want to make sure you have a mortgage insurance policy. Mortgage insurance is designed to cover the mortgage company if you default on your payments. Mortgage insurance has a high deductible and only covers a small percentage of your payments. If you have a significant amount of assets, umbrella insurance can protect you from any lawsuits you may face. Umbrella insurance policies offer a high level of coverage at a relatively low cost. It’s important to make sure you have the right amount of coverage. Too little and you aren’t protected against lawsuits, too much and you’re wasting money.
Homeowners and Condo Insurance
Homeowners and condo insurance policies cover the cost of repairs to your home, contents, and other buildings on your property. It also covers any lawsuits that arise as a result of injuries on your property. If someone gets hurt while they’re on your property, they may decide to sue you and your insurance company will cover the cost of any damages and legal settlements. Homeowners and condo policies also cover the cost of putting your property back to its original condition. There are two types of homeowners insurance policies: named peril and all-risk. Named peril policies only cover damage to your home caused by the specific perils (storms, floods, etc.) listed in your policy. All-risk policies cover all types of damage to your home, regardless of the cause. There are two types of condo insurance policies: named peril and all-risk. Named peril condo policies only cover damage to the common areas of the building.
Insurance is meant to protect you from worst-case scenarios. If you get into a car accident, your auto insurance will cover the cost of repairs. If your furnace stops working in the middle of winter, your homeowners insurance will cover the cost of repairs. Insurance isn’t something you should take lightly. It’s meant to protect you and your family in the event of an accident or unexpected illness. If you fail to invest in the right type and amount of insurance, you may have to deal with some serious consequences further down the road: High premium payments, bankruptcy, or even foreclosure on your home. By buying the right type of insurance, you can protect yourself and your family from these serious consequences.