Whenever an accident happens, your insurance policy acts as a safeguard to ensure you are prepared financially to withstand the troubling time. Whether a natural disaster destroys your home or an illness takes you away from work, your insurance policy stands between you and the expensive costs of untimely events.
Choosing the right insurance policy depends on your specific circumstance. Lifestyle choices, number of children, health, and age are factors that shape the type of insurance you will need.
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Although there are insurance policies for everything from pets to travel, many financial advisors suggest most people need: home, health, life, and car insurance.
Anyone who owns a home needs homeowners insurance. This type of insurance protects your home and external structures, such as your garage or porch, in the event of major damage. When considering homeowners insurance, there are two policy components to note: liability coverage and property coverage.
Liability coverage helps cover costs associated with personal injury on your property. For example, if a neighbor falls on your property and gets hurt, then liability coverage pays for unexpected legal matters if your neighbor opts to sue you.
Property coverage helps pay for damage to your home in the event of a disaster. For instance, if a fire burns a portion of your home or your roof flies off during a tornado, then property coverage pays you to fix the damage.
When deciding on home insurance policies, it is important to remember you need to choose the right amount of property coverage and liability coverage you will need. The more coverage you need, the more expensive the premium. The dollar amount of the deductible you are willing to pay directly affects the dollar amount of your premium.
When choosing your insurance policy, ask your insurance agent about coverage limits and how much the insurance policy covers for loss of personal possessions. Inquire about common out-of-pocket expenses to help you choose the right policy for your situation.
Ask your insurance agent directly about what damages your policy covers. For instance, some policies make flood insurance or earthquake coverage an additional expense.
Health insurance is one of the most important types of insurance to secure. This type of insurance pays for medical care in the event of an accident or illness. In some cases, you can receive health insurance through your employer. For those without health insurance through an employer, selecting the right health insurance policy is accomplished through a reputable insurance company.
Some people opt for medical care through the Affordable Care Act to accommodate their health insurance needs when financial limitations are present, while others choose a policy directly from health care options with specific insurance companies.
Specific options from health insurance companies can include preferred provider organizations or PPOs, exclusive provider organizations or EPOs, and point-of-service plans. More common options for medical care through insurance companies include:
Low-deductible plans - These plans require higher premiums upfront for medical coverage. With this option, out-of-pocket costs are lower and you rarely have to worry about paying thousands of dollars out of pocket for medical care.
High-deductible plans - These plans have lower premiums, which require smaller upfront costs each month. With this plan, you are required to cover your individual basic care. This plan is ideal for someone who does not visit the doctor regularly or does not incur health care expenses frequently.
High Maintenance Organizations or HMOs - These types of plans require in-network doctors and physicians to perform medical care. HMO policies accept medical rates set by your insurance company for you to receive medical care. HMOs offer convenience and peace of mind when trying to locate a doctor or physician through your insurance.
When a death occurs, life insurance policies pay your beneficiary to cover any associated expenses of death. Depending on your hobby or health condition, you can pay more for life insurance. For example, if you enjoy skydiving or parkour sports, then expect your life insurance policy to be more expensive.
If your family relies on you or your income for bills and expenses, then term life insurance helps your dependents or beneficiary cover financial expenses. Anyone with dependents should invest in this type of insurance. Term life insurance policies are most common, and this type of policy remains in effect for a designated period. Whether 10 years or 20 years, term life insurance covers you for a set time.
Whole life insurance is more expensive than term life, but this type of insurance policy remains in effect as long as the premium is paid. Whole life insurance, as the name implies, can cover you for your entire life. This type of insurance works well for people who desire a cash value for their insurance to be used during retirement or for expenses later in life.
When deciding on which policy is best for you, consider your age, lifestyle, health, and the number of dependent children.
Many people are familiar with car insurance because this type of insurance is required to drive a vehicle. Each state has a different requirement for car insurance, however, most states require liability insurance at a minimum.
Liability insurance covers damages and injury to other people if you are responsible for a car accident. Liability insurance does not cover damages to your vehicle and does not cover any losses you incur as a result of the accident.
Collision coverage pays the expenses to repair your vehicle when the vehicle is damaged or totaled during a car wreck. Collision insurance offers financial peace of mind for you whether you are liable for the accident or not.
Comprehensive coverage on your car pays for repairs to your vehicle or the replacement of your vehicle in the event of an accident not caused by a wreck. For example, if a tree falls on your car or if your vehicle is stolen, then comprehensive car insurance offers financial compensation for your vehicle.
Insurance helps keep you financially safe when accidents occur. There are many different types of insurance. When choosing the right insurance policy for you, you need to understand your specific needs and select a policy that caters to those needs. Everyone has a different need for insurance. Whether it's umbrella insurance to cover additional expenses within an existing policy or renters insurance to keep your personal belongings safe inside your apartment, selecting the right insurance policy can make or break your financial freedom when an accident occurs.