A Beginners guide to learning how to protect yourself
Disclaimer: This article is for informational use ONLY. It should not be considered financial or legal advice. JTML8ter recommends consulting with a financial advisor before making major financial decisions.
Table of Contents
It’s no secret that insurance can be confusing. With so many types of insurance, it can be hard to know which one you need. In this post, we’ll break down some of the most common types of insurance and explain why you might need them.
By the end of the reading, you should better understand insurance basics, and which types of insurance might suit you.
What is Insurance
Most individuals have insurance, whether for their life, home, or car. But, most of us rarely pause to consider what insurance is or how it functions.
In a nutshell, insurance is a form of managing your risk and protects you against any financial loss in an accident. It is a contract, symbolized by a policy, under which a policyholder receives financial security or compensation from an insurance firm against losses. In order to make payments to the insured more manageable, the company pools the risks of its clients.
Insurance policies are intended to protect against the possibility of monetary losses, large and small, that may be brought on by harm to the insured or their property or by liability for harm or injury given to a third party.
How does it work
There are many kinds of insurance policies available, and almost any person or organization can find an insurance firm to insure them. Auto, health, homeowners, and life insurance are the most popular categories of personal insurance plans. Most Americans have at least one of these types of insurance, but the most common is auto insurance this is because it is required by law.
Understanding the pay is also important. There are two components you should know this is premium and deductable. Premium is the price one would pay for coverage. its normally done by monthly installments. A deductible is a particular amount that the policyholder pays out of pocket prior to making a claim. policies with a high deductible usually results in being less expensive.
What are the different types of Insurance
Car Insurance
Car insurance is a must if you own or lease a vehicle. Most states require that all drivers have at least liability insurance, which protects you financially if you cause an accident that damages someone else’s property or injures/kills another person.
There are different types of car insurance coverage, and the amount of coverage you need will depend on factors like the value of your car, your driving record, and whether or not you have any other assets that need to be protected. You can speak with an agent to determine how much coverage is right for you.
If you’re financing your car, your lender will also require that you have comprehensive and collision coverage, which pays for repairs to your vehicle (minus your deductible) in the event of an accident or other covered incident (e.g., theft, fire). You can typically drop these coverages once your car is paid off.
Homeowners/Renters Insurance
If you own your home, your mortgage lender will require that you have homeowners insurance. This policy covers your home and belongings in the event of damage from covered incidents like fires, storms, theft, and vandalism. Even if you don’t own your home, it’s a good idea to get renters insurance to protect your belongings from damage or loss.
Renters’ insurance is typically very affordable—we’re talking $15-$20 per month for most people—so there’s no excuse not to have it. Most landlords also require this or will charge a fee until you receive the coverage.
Health Insurance
Health insurance is a must for everyone. Take advantage of it if you’re lucky enough to still be on your parents’ plan! Once you turn 26, though, you’ll need to get your own.
Health insurance protects you financially in case of an unexpected illness or injury by covering doctor visits, hospital stays, prescriptions, etc.
Hospitals and other medical providers usually bill health insurers directly for covered services, so patients only have to pay their deductible, copayment, or coinsurance out-of-pocket. Some health insurers also cover preventive care services like annual physicals at no cost to patients.
The amount of coverage you need will depend on factors like your age, your health, whether or not you have any pre-existing medical conditions, etc.
There are two main types of health plans: HMOs and PPOs. HMOs tend to be less expensive but have more restrictions on which doctors and hospitals you can use. PPOs are more expensive but offer more flexibility in terms of providers.
Disability Insurance
Disability insurance provides income protection if you cannot work due to an illness or injury. If you’re injured and can’t work, disability insurance will replace a portion of your lost income (usually around 60%).
If you have a high-deductible health plan (HDHP), chances are good that you already have some form of short-term disability insurance through your employer. If not, it’s worth considering since even a short hospital stay could leave you with tens of thousands of dollars in medical bills.
Do note that Long Term Disability (LTD) policies don’t cover short-term absences from work due to sickness or injury; short-term disability (STD) policies cover these types of absences.
Long-term disability insurance focuses on things that prevent you from working at all. It typically pays benefits for an extended period (e.g., two years or until retirement) and is usually offered through employers; however, policies can also be purchased individually.
How Do I Determine the Best Option for Me?
Now that we’ve reviewed some insurance basics, you might wonder how to determine what’s best for you. The best way to do this is by speaking with an agent who can help assess your needs based on factors like age, lifestyle, job, location, etc. They can also answer any questions you might have about specific types of coverage.
Conclusion
insurance is a contract for managing your risk and protects you against any financial loss in an accident. There are many different types of insurance out there, but as an adult, these are some of the most common (and essential) ones you’ll encounter.
Car insurance is a must if you own or lease a vehicle; homeowners/renters insurance protects your home and belongings; health insurance covers doctor visits and hospital stays; and disability insurance replaces a portion of your lost income if you’re unable to work due to illness or injury.
Do some research on each type of policy before making any decisions to ensure you’re getting the coverage that’s right for YOU.