What is Insurance
Understanding Insurance: A Comprehensive Guide
Often the word insurance is mentioned in our day-to-day languages but nevertheless so few of us know what insurance is all about? Relating to health, auto, home or life insurance, the ideas are more often than not complex to comprehend. However, in this article, I will try to make this topic more understandable to the audience … We will also intersperse the lesson with typically ‘me’ stories and real-world examples to make it interesting to do so.
What is Insurance?
In simple terms, insurance can be defined as one of the financial products created for risk coverages in the future. When you buy an insurance policy you have an agreement with an insurance company in USA. To have the insurance policy, you pay a standard amount of money frequently; the insurer on the other hand promises to pay for specific losses, damages or liabilities that might happen. Such a structure helps people and companies to manage the risks with the money involved in daily life.
Types of Insurance
While there are numerous types of insurance, let’s focus on a few of the most common categories:
Health Insurance:
Medical expenses which result from diseases, accidents, or any other health complications are Well covered in this type of insurance. It can include homes, surgeries, prescription drugs, and annual checkup. For instance, last year my friend Alex had a heart attack. Thanks to health insurer status, he could afford the necessary tests and treatments without being concerned by rather high prices. It eased the tension of the situation a little slightly.
Auto Insurance:
Needed in almost every state, auto insurance safeguards you against monetary loss in case of an incident your auto or truck. It is possible to include an amount for the repair or replacement of your car, medical costs in case you are badly injured and the amount that you can claim from other drivers and their cars or property. It is true that when I got my first car, it was quite clear that the choices that I have had to make are endless. But then I was made to know that there is nothing like good auto insurance especially when I was careless and just hit another car as I was trying to squeeze through a congested parking area. As expected the insurance paid for the damages and from then on I became more careful while driving.
Homeowners Insurance:
Deeds coverage provides insurance against fire, theft as well as natural disasters in your home and your household property. It can also give protection against loss in the event that a person gets injured in your compound. My parents home was hit by a very bad storm some few years ago. Thankfully there was a sort of payout from their homeowners insurance to repair the damages and relieved that they wouldn’t have to pay the price by themselve.
Life Insurance:
Life insurance incorporates a single payment to your beneficiaries once you are dead. That way, whenever one is estranged, the family is financially secured, and the survival of the family is guaranteed. My friend has been a parent and they to took new life insurance policy. He planned to have a financial protection in the event of his death, which would include paying bills such as the mortgage, educational fees of the children among other.
Disability Insurance:
This kind of insurance provides for cash benefits in case you are unable to work because of such a disability. It may prove to be vital for owners who among other things depend on their revenue to put food on the table. One of my friends used to be a freelance graphic designer, but she fell really sick and was not to able to earn money for quite some time. Fortunately, she had disability insurance to support her living costs during that terrible time.
Travel Insurance:
Travellers’ insurance is a contingency plan that shields the individuals in situations which include health complications, cancellation of travel, loss of baggage among others. Why is it essential? As you know, the best made plans can falter – flights can be cancelled or changed, or you find out that you’re too sick to travel. Who needs to get travel insurance? Anyone who is planning or travels to a foreign country or even within his or her own country on a business, leisure and adventure traveling either for short, average or long-term travel. Hearst presents nine different types of insurance and help you to decide which one is right for you. That depends on one’s journey and requirements. As much as possible, they want to have coverage regardless if they are alone or just on a vacation with the family.
Why Do We Need Insurance?
Now you may ask, “Why should I invest in insurance?” Well, life is full of uncertainties and that makes the reason. I am talking about such things as car accidents, sickness, fires, floods and other situations which we cannot predict when they will happen. Here are some compelling reasons to consider insurance:
Financial Security:
Insurance is there to protect an individual in case of an incident or any calamity that may occur in life. For instance, my friend Sarah experienced car accident last year. By being an insured person of her auto insurance, her costs such as her medical bills and cost of repairs were greatly footed hence she did not struggle with bill payments. Without that coverage, she could have been charged thousands of dollars for the same.
Peace of Mind:
It is reassuring if you think that some if not most of possible losses are covered. Whenever I had bought my first house, having an insurance policy for the house was comforting. I understood that would not leave myself in vulnerable to a situation where I have to struggle to make ends meet. It freed me from stressing over what could possibly happen to my new home and instead make me appreciate what I had gotten.
Legal Requirement:
Some insurance for instance the auto insurance is required by law in several regions across the globe. They are however risky since one is likely to be heavily fined or even charged in court for driving a car without insurance. I had a situation of this the hard way when I almost got arrested for not having the insurance card on me. By always placing it in my glove compartment it has indeed been a lesson learnt the hard way!
Protection for Loved Ones:
Some of the areas that benefit from life insurance include; dependants. If you are the only source of income in the household, a policy guarantees that your family will not lament over loss of income when you are gone. When I talked to my brother the other day he got a life insurance policy for his surviving family of two young kids. He would like to make certain of providing for his kids in case things go wrong, he has to be certain of their financial security.
Who Needs Insurance?
Everyone is in some way or another connected to insurance but what applies to him/her depends on his/her profile. Here’s a breakdown of who might need what type of insurance:
Young Adults:
The other important aspect for people in their 20s is health insurance if one is entering the working market with no insurance cover. Some of the companies included it in their packages, but if you are a businessman or a freelancer, he has to buy a medical insurance plan by his own. A close friend of mine when joining a company of her dream chose the minimum health cover to start with, and when she was diagnosed with a disease that needed surgery she was very much relieved to have the medical cover.
Families:
In particular, life insurance becomes more significant when you have children with you in the family. It guarantees that your children’s needs shall be catered for in case you are not alive to do the catering. For instance, when my sister was expecting her firstborn, she and her husband sat down and tried to figure out how they would ensure a proper future for their child, hence they decided to get life insurance.
Homeowners:
It is almost mandatory, especially, if you own a home, to have homeowners insurance. For instance, it offers you a shield against your property, and in case of a liability claim because somebody has fallen in your compound, you are also shielded. The day before yesterday my neighbour got involved in a case where a guest slipped and fell on their compound. Fortunately, their homeowners insurance paid for all legal costs and medical bills that may possibly ensue.
Drivers:
That is correct, every car owner needs to have his car insured to be protected financially in case of an accident. It helps you stay shielded in a financial front in the event of an accident or theft. When I think of my first car I recall that even in a case of a mere scratching of another car door I could incur huge costs in the absence of insurance.
Business Owners:
If you are a business person you should note that there are many risks that exist and to counter these risks there is business insurance. Recently my friend opened a small bakery and soon he has understood that to be protected from accidents that can occur in the kitchen or if a customer gets hurt in the store, he needs insurance.
Which Insurance Should You Choose?
Insurance selection tends to be a daunting process because many insurance companies are out in the market. Here are some tips to help you make informed decisions:
Assess Your Needs:
Subsequently, begin by making self-assessment on matters concerning the subject in question. What great threats do you have? If you have a family, something may be rated higher than life insurance and the dollar may not be the greatest concern, but people are more important than the dollar. Car insurance, if you own a car, is mandatory and cannot be done away by any chance on earth. I recall being called by an advisor for a consultation of what I required when I or out of college. I never knew how much cover one could be afforded by policies.
Shop Around:
The consumer should not just accept whatever policy he or she stumbles upon. It is advised to look for various offer rates on the Internet so that you can compare the providers. The use of the internet makes it rather simple to get the characterization of coverage and premiums within hours. To get health insurance, I visited the internet and looked for those sites that have the options of comparing different packages for their advantages and disadvantages. This meant that it cut my spend, turning out to be time saver in the entire process.
Understand the Fine Print:
It is advisable that one reads and understands the extent if his or her s that is being offer as well as what is not covered. Identify potentially restricted and excluded events and circumstances and specific conditions that may influences your coverage. Another woman I worked with tripped in the exact same way as Mrs Penfold, but fell into a hole, and sadly, she underestimated the ill effects of her policy and found she barely got half the coverage that she needed for the damages that occurred to her. She realized the moment when everyone learnt that it is always better and safer to be asked about the details.
Consult an Expert:
If you are confused about what type of insurance you require then it’s time to talk to your insurance agent or financial planner. They can assist in to designing one that would be appropriate for you. Before buying my first home I wanted to know how much homeowners insurance I needed to get so I consulted an agent. I greatly benefited from their input which helped me in the process.
Review Regularly:
Your insurance requirements may also change in future depending on the changes that you undergo in your life. Policy reviews should also be conducted on annual basis, to determine if your policies suit your needs or not. My wife and I recently got married and decided to reconsider what type of insurance we needed and didn’t have just got married.
Personal Anecdotes: Real-Life Experiences with Insurance
The Health Insurance Lifesaver
A few years back I was myself in a critical situation where my cousin Jake had a severe medical issue. Kale had been experiencing some flu like symptoms for weeks but never thought to go see a doctor because he could barely afford the bills. By the time he visited the doctor he was advised that he had a condition that needed surgery. Thankfully, he had medical insurance and therefore most of the costs relative to his treatment were catered for by the insurance firm. Without it, he could have been taken down by thousands of dollars’ worth of bill which would have seen him owing his physicians for years. This made me realize why one needs to be an under health insurance especially during emergences.
Homeowners Insurance: A Lesson Learned
My parent, for instance, when they were purchasing their first home, decided to go for a standard homeowner’s insurance. It was a terrible winter, one of the pipes frozen and burst and the basement was flooded. The car insurance firm compensated for the repairs but, this was an eye opener on how they under insured their cars. Both failed to see the fact that their policy came with certain restrictions on the kinds of damage. That is why in the years that followed that incident, they enhanced this issue and studied the policy for each year. It was a good experience which gave them an understanding of how to ensure that their properties are secure.
The Importance of Life Insurance
It is between me and my best friend, Lisa who has recently join the league of mothers. This can range from life experiences such as for instance when a couple start thinking about life insurance after the birth of a kid and discovering they cannot afford it any longer. Someone once said that the two best things in life are making love and watching TV and that this couple wanted to ensure that in case anything befell either of them, then the child would be financially secure. For instance, they opted to take a term insurance policy to give sufficient coverage for the next twenty years of their lives thereby freeing themselves from undue preoccupations of future difficulties such as child-bearing concerns.
The Unforeseen Accident
Some years back I was at a wedding when one of the past guests fell and got so injured they had to be taken to the hospital. In the event the couple had thus paid for liability insurance, which in this particular dined provided the guest medical costs. This was welcomed by them as they had planned the wedding to be cheap considering the little resources they had. This show me how it is essential to have insurance every event not only in the critical situations but also in usual meeting and other activities where some risks can occur.
Common Myths About Insurance
However, many myths are associated with insurance which causes confusion amongst individuals. Here are a few common misconceptions:
“I’m Young and Healthy, I Don’t Need Insurance”:
Youth are usually more suited to employ for physical tasks because they are healthier, but accident on the job can occur to anyone at anytime. Everyone should have at least minimum health insurance to avoid incurring from unexpected cost of medical bills. I realized this after one of my age-mate was involved in a severe accident while trekking in the mountains. Imagine going through medical bills when you do not have insurance company to settle them.
“Insurance is Too Expensive”:
However, as seen many people are likely to overemphasize the cost of premiums even though they differ. It helps to shop around and look for suitable deals and there are normally cheap plans out there that would suit your pocket. So when I was on the hunt for auto insurance I was shocked at just how much I could save by changing my provider.
“I Can Rely on My Employer for Insurance”:
But, depending on your employer for your insurance needs is nice though it may not meet all the required needs. It is even better to go for individual policies that could better cater for your needs as opposed to a group policy that may be standardized a little. A friend of mine did not know this the hard way when she lost her employer’s health plan for a necessary procedure.
“Once I Get Insurance, I’m Covered for Life”:
Life events may affect one’s insurance requirements at some time or another. In other words, it is vital that you revisit and reassess your policies on a frequent basis so that you are properly insured. When I moved to a different company and different city, I felt that I need to change my health insurance plan because I fell different now.
“I Don’t Need Insurance if I’m Healthy”:
There are a lot of people that think that insurance is not necessary for them if they are in good health. But, we must understand that emergencies and mishaps can occur in anyone disregarding one’s health condition. A friend of my who is very active and a sportsperson once had to be rushed to the hospital for what was a very successful sportsmans fate. Fortunately, the expenses are going to be reimbursed by the health insurance that he had taken for the financial year.
Conclusion
Insurance is a critical factor in human’s financial planning since it offers protection against future risks. This knowledge entails the various types of insurance, the rationale of obtaining them as well as the ability to decide on which policies to purchase. It is such moments which make life uncertain and insurance the savior though many people do not understand this fact until it happens to them or their relatives or friends like my cousin, parents and my friend.
If you are moving your insurance needs, then keep evaluating your needs, comparing with other services, and consulting the specialists. If you follow these steps then you, your family, and friends will be shielded from whatever life gives you. So remember this and take a leap of faith into the insurance market and get the policy that fits your life. I always say, let your future self be grateful you did this.
Lastly, insurance is not all about covering one’s self financially but about the comfort of an individual and the one’s he or she loves. Be it health insurance, auto insurance or life insurance, the basic idea is clear, having the right insurance can determine how you handle the unexpected events that life brings. Thus, do not believe everything at once, consult when necessary and follow the rules that will be beneficial for you and your family for many years.
