Insurance

People use insurance so that they can protect their health, personal property, and their income streams. The basic premise of insurance is that the risk is pooled into one “pot” of money and then paid out to individuals who need care or financial resources.  If you are an individual that is extremely wealthy, maybe you choose not to use insurance products. This is called self-insuring, but almost no one does this. Instead, you will most likely pay a scheduled premium payment and have the peace of mind that if something happens, you will have enough coverage to take care of the things you have decided are important.  

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Although there are many types of insurance that a person may have depending on their personal situation, there are a few that are considered basic coverages.

  • Health Insurance covers medical costs for you and your family members if they are added to your policy
  • Life Insurance provides income for your chosen beneficiary in the event of your death to pay debts and replace lost wages
  • Homeowners Insurance provides protection for unforeseen circumstances that may damage or impact your personal living space
  • Renters Insurance covers your property inside of an apartment or rented living space
  • Auto Insurance policies protect you and other drivers from damage associated with auto accidents or mishaps

Your insurance needs will change over time, and you would be smart to always evaluate and adjust your insurance coverages to fit your situation. You want to have enough coverage to take care of your specific risk factors, but not so much coverage that you are spending too much money on your premium payments.

Your age, health, assets, family members, job, income, and risk level all need to be taken into consideration when deciding what type and how much insurance coverage to have.  Some insurance products are required by law (auto and homeowners) while others are completely optional and left up to you as an individual. The best possible way to make sure that you have appropriate levels of coverage is to do little homework and make sure you fully understand what is covered and at what level for each product that you may be considering.

Did you know...?

"The Affordable Care Act (ACA) allows children to stay on their parents' health insurance plan as dependents until they turn 26 years old. This applies to both married and unmarried children, and to all employer and individual market plans. Coverage usually ends on the child's 26th birthday."

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In summary saying, be sure to check with your parents before applying for your own health insurance!

How to Choose Health Insurance?

Let’s look specifically at health insurance as an example. There are a number of variables to consider when selecting a health insurance policy. Paying a higher premium may mean more procedures and items are fully covered, but if you are young, healthy, and generally not using medical services very much, is it a good idea to pay the higher premium? Maybe you can pay the lower premium and be sure to have some savings set aside in case something unforeseen happens. However, if you have a preexisting condition, take some medicines, or are generally accident-prone, you might want to pay a higher premium because you often utilize medical services. The point here is that not all insurance policies are made the same, and you want to be sure you are paying for coverages that will work the best for you personally and your budget.

 

This chapter is only meant as an introduction to insurance coverage and things to consider. There are many decisions that need to be made when considering any type of insurance product and you would be wise to seek the assistance of a professional who is experienced in the specific type of product you may be thinking about. 

 

Learning Checkpoint:

Optional Activity: Learn more about Auto Insurance at WalletHubLinks to an external site..