Thinking about buying a new car? Starting a family? Chances are that you will be targeted by financial institutions with the intentions of selling you an insurance policy. Whether it be car or life insurance, it is always wise to put money aside for any unfortunate situations that may arise in the future. Not being prepared to pay for things that are out of your control can be costly. As a result, having insurance can be wise financial decision.
In order to be in the best position to buy insurance for your needs, it is best to understand the basics. Here are 9 facts that you need to know.
1. Common forms of insurance
The common forms of insurance that you can purchase from insurance companies and financial institutions are: life, property, car, health and travel. The decision to get insurance will depend on your circumstances and your stage in life. For example, if you decide to buy a brand new car instead of an used car, you may wish to buy auto insurance.
2. What is “coverage”?
Coverage is the amount of money that you wish to be insured for. In the case of buying life insurance, you may want to be insured for the amount of money that you may earn in the future. Although you can ask for a specific amount (i.e., $250,000) , the insurance company or financial institution will ultimately decide the amount of the coverage will be granted to you.
3. What is a “premium”?
A premium is the amount of money that you have to pay to be covered by the insurance policy. Payments can be done on a monthly, quarterly or annual basis. Premiums may change over time and calculated differently depend on a series of factors for each form of insurance.
4. What is a “claim”?
A claim occurs when you can ask for a certain amount of money from the policy to cover any loss or damage. Before receiving the money, an investigation will be conducted to examine if the circumstance for the claim is legitimate. As a result, it is wise to have all supporting evidence to validate your claim. The more evidence you have, the quicker the claim process will take.
5. What is a “deductible”?
In some situations, you will be asked to pay a “deductible” which is a portion of the claim for the loss or damage which the insurer will not pay. Choosing a higher deductible will decrease the cost of your insurance premiums because you agree to pay for a larger part of your loss. Deductibles are associated with health, dental, property and auto insurance policies.
6. Who is the “insured”?
The “insured” is the individual(s) that are protected by the insurance policy. In the event that you have auto insurance, it is important to have all drivers (i.e., family members of driving age) on the policy as the insured. If your auto insurance provider discovers that a non-insured individual was driving your car in an accident, the provider can decline to pay out the claim.
7. Who is the “beneficiary”?
Owners of a life insurance policy must name a beneficiary or beneficiaries. In the event that an owner of a policy dies, the beneficiary or beneficiaries will receive the death benefit (i.e., the amount of coverage).
8. What are “exclusions”?
When buying insurance, it is important to investigate exclusions. Exclusions are things that are not covered by your policy. For example, travel insurance policies can exclude claims if something unfortunately happens in a high risk region of a country in terms of theft or a threat to your safety.
9. How can you obtain insurance?
There are various outlets that you can obtain insurance from depending on the different forms that are needed. The specific insurance companies and individual brokers will attempt to sell you policies that are supposed to be better deals than offered by banks. On the other hand, banks will position themselves as the place that takes care of all of your financial needs. In either case, it is important to do your research on what you need and the different offers on the market. In addition, if you are employed full-time, check with your employer if any insurance plans are in place for your benefit.
Although some individuals believe that some forms of insurance are not worth the money because there are not any tangible benefits to be had once premiums are paid, insurance can be a wise investment for the future and for a peace of mind which is invaluable.