insurance

What You Need to Know When Shopping for Insurance

Whether in personal or professional activities, individuals may be exposed to a number of events that ultimately can create a financial loss for them. For example, a car accident or a house fire can occur, and an individual may be required to pay thousands of dollars or significantly more as a result of these events. Insurance is designed to minimize the financial loss that individuals experience when these events occur. There are a wide range of insurance policies available today, and just a few of the more common types include life insurance, health insurance, property insurance and disability insurance. Because insurance coverage can drastically reduce the financial loss that an individual experiences when specific events occur, it can be beneficial to learn more about how insurance works and how to buy a suitable policy for specific needs.

How Insurance Works

Before an individual begins shopping for insurance, it is important to understand how coverage works. Each insurance policy may be slightly unique. However, most insurance policies have specific, itemized events that are covered under the policy. For example, a health insurance policy may cover expenses for well-checks, and car insurance may cover expenses for an auto accident. If an event that is covered by the policy occurs, the individual can file a claim with the insurance company. The insurance company will process the claim, review the financial loss that was experienced and pay out a settlement to the insured based on the terms of the policy. It is important to note that the payout for a settlement is determined by coverage amounts detailed in the policy.

The Right Type of Coverage

While the different types of coverage can generally be broken down into major groups, such as life insurance or auto insurance, there are unique coverage options available within these types of policies. For example, with life insurance, individuals can choose to purchase whole life or term life insurance. They can also specify the amount of death benefits they want and may have control over the term length and other factors related to the coverage. Furthermore, by shopping around, individuals may find more comprehensive coverage inclusions. Because there are so many options available for individuals to choose from and because the coverage inclusions can vary from insurer to insurer and from policy to policy, it is important for individuals to define what their needs for coverage are and to thoroughly shop around to find the right type of coverage for their needs.

The Right Amount of Coverage

In addition to finding the right type of coverage for specific needs, it is also imperative that individuals carefully consider the amount of coverage that they are purchasing. For example, with a life insurance policy, it is possible to purchase a basic $15,000 policy that could largely be used to pay for funeral expenses. On the other hand, it is possible to purchase a more extensive policy that may offer death benefits of $1 million or more. The amount of coverage will affect the total cost of the insurance premium, but it also can drastically reduce the financial risk that individuals or beneficiaries face in relation to a specific event.

The Expiration or Renewal Date

With most types of insurance coverage, the policy that is purchased will have an expiration or renewal date in place. It is typical for health insurance policies and auto insurance policies to renew automatically every six to twelve months, but life insurance policies may expire without a renewal option at the end of a longer term. At the end of a renewal period, the insurance company may adjust the premium or may make changes to the coverage. Therefore, it is important to note when the renewal date is. If the policy will expire at the end of the term, individuals should be aware of when the expiration date is so that they are not caught in the situation of not having coverage when they need it.

There are many types of insurance coverage that individuals can purchase today, and each insurance policy provides beneficiaries with the ability to reduce their financial liability or risk associated with specific events. In some cases, individuals may be required to purchase a minimum amount of coverage. For example, mortgage lenders typically require homeowners to purchase a minimum amount of property insurance while their loan is in effect. When individuals take time to learn more about what the coverage options are and to define what their needs are, they can most easily take advantage of the benefits of insurance coverage.