In our everyday lives, we sometimes hear about insurance policies. But do we understand what they are, their different types and most of all, what they protect? Before you are ready to purchase any of those kinds of insurance, it is best to first be informed about what they are and what benefits they can give to you. Knowing this information can help you choose the types of insurance that are suitable for your needs.
Insurance is, simply put, a promise to be compensated for a specific future risk, danger, injury, or loss at an uncertain time, in exchange for a payment. It is a special kind of contract which involves an insurance agent and his/her client, and a form of risk management designed to protect the financial security of the latter. A client who has purchased an insurance policy is called policyholder.
1. Life insurance
This is one major type of insurance everyone should be aware of and have, particularly if the person has a family or a designated beneficiary who is totally dependent on his/her income to pay for everyday bills and living expenses. The greatest factor for this type of insurance policy is that the family/beneficiary that the client leaves behind will be ensured of a financial cushion. At the time of the client’s death, this type of insurance will cover existing expenses as well as funeral and burial expenses. The bereaved family will receive benefits so that they will be able to start all over again. This type of insurance gives the beneficiary the option whether the proceeds shall be paid in lump sum or in an annuity. An annuity is a contract between the insurance company and the buyer in which the latter makes lump sum payments or a series of payments (which are usually done prior to the beginning of the annuity period) in exchange for the later regular payments.
2. Health insurance
Everybody gets sick, and none of us will be spared from serious illnesses especially as we grow older, so having health insurance is one of the most important forms of insurance policies. As you might have guessed, a health insurance policy covers the high expenses of medical care. In many parts of the world, most employees get their medical insurance through their employers as part of the company benefits package. Oftentimes, dental care coverage also makes up a part of the health insurance. Apart from involving the company to pay a portion of your medical care expenses, you can also enter a health insurance contract with an agent.
3. Property insurance
This is also an important type of insurance. It provides protection to your property, mostly a house or a commercial property – against various kinds of risk, whether they are natural or man-made. This type of insurance breaks into sub-categories such as earthquake insurance, flood insurance, volcano insurance, even terrorism insurance which saw an incredible uptrend in demand following the 9/11 attacks. Property insurance covers a lot of fields; there’s even an aviation insurance that covers parts (such as hulls and spares) that are detached from the aircraft itself, as well as the liability risk protection such as liability from the airplane passengers. Landlords insurance provides security for the rental property owners in case they experience losses from their rental assets. Home insurance is the most common form of property insurance which provides coverage for all kinds of damage or destruction (whether they be natural or man-made) on the homeowners’ property. However, the cost of the maintenance (for example, if you need to change your old, dilapidated ceiling) should be shouldered by the homeowner alone.
4. Auto insurance
As almost everybody here in this country owns an automobile, this would be the best insurance to use especially if you’ve just bought your own car. This insurance covers the damage to your car especially if you’ve just been in a road collision – or in some cases, experience a theft. It also includes liability coverage which means that if you accidentally injure someone or even cause someone’s death due to your negligence, you are insured from the liability expenses for the damages incurred. This insurance also covers medical expenses for the parties involved in an accident, regardless of who is to blame for it. Normally, the amount of coverage for the property damage goes up to $100,000 per accident. Check with your insurance agent to confirm the limits.
5. Disability insurance
Disability insurance is similar to life insurance in some ways. About 10% of Americans experience accidents or illnesses that leave them unable to work for a prolonged period of time.
You might be able to support your family with your own savings while you are recovering from an accident or illness during a shorter amount of time. However, disability insurance will be able to support you while you’re recuperating for sustained periods of time.
Usually, disability insurance replaces only half of your income. But this is still better than not having any financial support at all when you become unable to work due to your disability. It is best to be responsible with your finances and to save up whenever possible while you’re still healthy to ensure your financial obligations will be met if you should become disabled.
There are many other forms of insurance policies but these four types mentioned above are the ones that you actually need and use on a regular basis. Remember, throughout your life you’ve worked hard to provide yourself and your family with a secure, happy life, as well as to protect your properties, income, and possessions. With insurance, your family will be assured of financial security even after you’re gone. It is wise to get one or more of these insurance policies while it’s not too late.