My 96-year-old grandmother was just hospitalized for a few weeks with a broken hip. If you or anyone close to you has ever been hospitalized, you know that the bills can add up quickly, reaching seemingly astronomical sums. Health insurance can help relieve what would otherwise be a tremendous financial burden. Without insurance, a single catastrophic health issue could drain the rest of my grandmother's life savings. Fortunately, she has good health insurance policies which keep that from happening.
For all of its complications, insurance is, in theory, a pretty simple concept to understand. You're paying an insurance company a fee, or premium, to reimburse you if something unexpected happens. The insurance company is hoping that nothing happens, in which case they get to keep your premium. But if something does occur, they will pay the associated expenses (called a claim) within the guidelines outlined in your insurance policy. Ultimately, the insurance company is gambling on the fact that all of its insurance clients--people like you and me--will pay more in premiums each year than is paid out in claims.
Insurance Awareness Day is this Sunday. (Who knew it was a holiday?) It's a good reason to review the most common types of insurance, and to make sure that you have sufficient coverage in case the unexpected occurs.
Automobile Insurance covers car owners in the event of several types of claims:
- Physical damage to your automobile or another person's automobile
- Liability for physical injuries to other people
- The cost of your medical care if you are injured in an accident
- Attorney's fees if you are sued
Many states require all automobile owners to carry certain minimum amounts of auto insurance, and you may be required to submit proof of that insurance when you renew your registration and license plates.
Health Insurance covers doctor's visits, hospitalizations, prescriptions and other medically necessary treatments. Your employer may provide private health insurance through group health insurance coverage, or you may purchase private health insurance directly from the insurance company for yourself and your family. Elderly and disabled persons may be eligible for coverage through the federal Medicare program. The joint state-federal Medicaid program helps certain individuals, including disabled persons and low-income elderly persons, pay for long-term care and in-home healthcare.
Life Insurance pays out money upon the death of the policy holder. Life insurance protects your family, dependants or other survivors, and provides a measure of financial security after your death. Many employers will often purchase life insurance on behalf of their employees. When purchasing life insurance, the insurance company will take into account several factors when calculating your premiums. These include:
- Age
- Condition of health
- Income
- Health habits
- Marital status
- Number of children
Property Insurance, which is often called homeowner's insurance, condominium insurance or renter's insurance, covers your physical property (such as your home, furniture and possessions) against damage or loss caused by any number of events, including theft, fire and weather. When purchasing property insurance, you'll want to consider a number of factors including:
- Do you live in a freestanding home or a condominium building? (Parts of a condominium structure may be covered by a master policy purchased by the homeowner's association.)
- Do you own or rent your home?
- What is the value of the contents of your home?
- What is the value of your home, excluding the value of the land it sits on?
- What types of weather more commonly cause storm damage in your region of the country?
- Do you have animals, pools, trampolines or other things on your property that could cause serious injury or death to someone?
When purchasing insurance, an insurance agent can help you determine what type of insurance you need, and how much coverage is necessary. If you purchase several types of insurance from an insurance company, you'll usually receive a discount. Keep in mind that insurance premiums do vary from company to company, so you'll want to comparison shop to make sure you're getting the best deal.
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