If 2020 and 2021 have taught people anything, it’s to expect the unexpected. For many, the pandemic negatively impacted their personal finances. While the need for being prepared to face a worldwide pandemic was something few could have truly anticipated, people can do things to protect their finances against other kinds of disasters in the future. Examples include increasing savings, building up an emergency fund, and taking advantage of insurance.
What is insurance?
Insurance is a protection policy that helps manage risk. Buying insurance for something is buying protection against unexpected financial losses. For example, if someone bought a new car and then purchased auto insurance, then the car was damaged in an accident, the insurance company would pay for the repair costs. Without auto insurance, the car owner would have to pay for the repairs. This could be difficult to afford, especially in addition to monthly car payments.
Purchasing insurance helps safeguard losses against a home, apartment, vehicle, and more. Insurance companies charge a fee, called a premium, which usually must be paid monthly, though some premiums are paid only once or twice a year. In addition to premiums, some insurance policies include a deductible. This is the amount a policyholder would have to pay before the insurance company would cover the rest. For example, if a homeowner’s insurance policy has a $500 deductible, and a storm caused $2,000 in damage to the home, the homeowner would pay $500 and the insurance company would pay the remaining $1,500. Usually, the higher the deductible amount, the lower the purchase cost of the insurance.
What are common types of insurance?
Health insurance. This is a contract that requires a health insurer to pay for some or all of a person’s healthcare costs in exchange for a premium. According to a recent study, healthcare has become this country’s largest source of debt in collections. If someone without health insurance needs medical care, the bills can be very expensive.
Auto insurance. This protects policyholders from having to pay the full cost of vehicle repairs, replacements, or medical expenses following an accident. In Maine, operating a vehicle without paying for auto insurance is against the law.
Life insurance. This is a contract with the insurance company to pay a set amount of money to a person of the policyholder’s choice if the policyholder dies. For example, a parent may choose to have their child be the recipient of their life insurance if the parent passes away. This can help the family pay bills and cover living expenses, or pay for funeral costs. Ultimately, the recipient can use the insurance money however they wish.
Homeowners insurance. This protects what is often a homeowner’s biggest investment – their home. The insurance company helps the homeowner cover the cost of repairs or a replacement, in the event of a disaster at their home.
Renters insurance. This type of insurance would cover personal belongings of someone who is renting a home or apartment, in the event of a fire, theft, windstorm, or other disasters. Renters can choose between actual cash value coverage, which will reimburse them for the value of the items at the time of the damage or loss, or replacement cost coverage, which covers the cost of replacing the items lost or damaged.
There are many other times of insurance, such as pet insurance and travel insurance. Whatever the type, insurance helps people manage their risks and protect their assets.
Where can people get insurance?
Some types of insurance, such as health and life, are available through employers. Other options are searching comparison websites for lists of insurance coverage options, or contacting a local insurance agent. To find a local insurance agent, visit usinsuranceagents.com