protect yourself with insurance

Posted : April 12, 2018
Last Updated : May 11, 2020

protect yourself with insurance

Insurance is an important part of a financial plan. Learn how to explain the purpose of insurance, analyze different types of insurance, and recognize the difference between an insurance premium and an insurance deductible.

What Is Insurance?

If you’ve ever played a survival-based game, one of the first things you need to do is build, create, or buy some way to protect yourself. You need a shelter and usually some sort of armor. Sure, you want to start exploring, but you will last longer in the game if you take care of this basic protection first.

Insurance is a vital part of a good financial plan. The right types of insurance act as protective barriers between your money (and investments) and life events. Without insurance, you are one accident away from losing everything.

How Does Insurance Work?

A premium is the monthly, quarterly, or annual cost for your insurance coverage. When you pay your premium, you are paying the insurance company to take on any financial risk in the event of an accident and to pay for some of the costs.

For example, your parents probably pay for health insurance. So, if you get hurt, go to the hospital, and need surgery with an overnight stay, it won’t cost your parents a fortune to take care of you. The insurance company would pay for some of the doctor and hospital charges because your parents pay the monthly insurance premium. However, your parents would probably still have to pay something – their deductible – but they wouldn’t have to pay for everything. Without health insurance, your parents could be facing thousands and thousands of dollars’ worth of medical bills.

Insurance Is Important

You can buy different types of insurance from an insurance agent or broker – someone who is trained and licensed to sell insurance. They will be able to help you find the best insurance options at the best prices. Your employer may also offer several types of insurance for you, and they may even pay for part or all of it.

When you start buying insurances, make sure your home and auto policies have enough liability insurance. Liability insurance protects you if someone were hurt on your property or as a result of an automobile accident involving your car. It doesn’t cost very much, and it is really important to have in place.

Types of Insurance

There are a lot of different types of insurance that you can purchase – some are really good ideas and some are really bad ideas. So, when it comes time for you to get insurance, what should you get? Here are seven basic types of insurance that everyone should have:
  1. Homeowners or Renters Insurance – protects your stuff where you live
  2. Auto Insurance – protects your car, the people in your car, and you
  3. Health Insurance – protects you when you are sick or hurt and need medical care
  4. Disability Insurance – protects you if an injury prevents you from doing your job and earning an income
  5. Long-term Care Insurance – provides your health care needs at age sixty or older
  6. Identity Theft Protection – protects you from fraud
  7. Life Insurance – protects and provides for family members in the event of death

Final Thought

Everyone needs to have insurance – just like everyone needs to wear a seat belt in the car.

Source: Ramsey Solutions
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