Insurance is a pain and most people avoid it like the plague. But it's also a necessary evil. The flip side of not having insurance is that if something bad does happen to you, you'll be scrambling to figure out how to pay for it.
If you have health insurance, the idea of being without coverage probably doesn't seem so dire. But what about if your car or house gets damaged? Or if somebody steals your identity? Read on for 5 things you need to know about insurance.
1) Pick a policy that is right for your personal needs
In order to avoid headaches, you need to learn the basics of the insurance industry. You can insure pretty much anything – be it personal belongings, vehicles, funeral expenses, you can even get terrorist attack insurance. Yes, terrorist attack insurance. Because you never know.
Don't fall for insurance companies that offer you short-term policies. You will end up losing more than you could have ever anticipated.
You should look into what you can cover and what you can't, and choose a policy that fits your needs. With that said, let's look at some of the common and important types of insurance that people avail.
2) Important Types of Insurance
As mentioned above, there are many different types of insurance. But there are a handful that stand out more than others, the types of insurance that address things that have a higher probability of happening.
When shopping around for insurance, it’s recommended to use a tool like PolicyScout for figuring out what insurances you need, and which insurance providers will give the best coverage options for your situation.
The common and important types of insurance include:
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Liability insurance – This covers you in case you are to blame for the damage to the other party's property.
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Car insurance – You need to insure your car in case it gets damaged in an accident.
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Property insurance – If your house is damaged, you can use this to replace the lost property and pay for its repair.
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Injury insurance – You can use this to cover the medical expenses of a person who has suffered a personal injury.
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Emergency medical coverage – This allows you to get immediate access to health care should you be involved in an accident.
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Life insurance – If you die, your family and dependents are taken care of. At least the cost of your funeral is, depending on your policy. Hopefully, you had a pension as well.
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Pet insurance – Fido isn't going to pay his own vet bills, because pets are selfish, so you need to get insurance to cover the cost of his medical bills if he gets sick.
3) Is Insurance just a financial scheme?
Sort of, not really, it depends. Some insurance is pretty much like gambling – will a bolt of lightning strike my precious coin collection? Insurance companies would love to insure that scenario! Other insurance types are rather useful, but there are just a few risks involved. It is really a matter of how you feel about that risk.
In the case of car insurance, for example, you might think you're a great driver. That's great for you. But, statistically speaking, chances are that you are going to be involved in an accident and will have to pay a large amount of money as a result. When considering the types of insurance to take out, there's a sliding scale of probability to consider.
So it might feel like you're paying for something that has a high chance of not happening to you, but, if you take out the wrong type of insurance, or no insurance at all, and that very thing happens to you, you're going to feel kind of foolish – and much lighter in the pocket.
4) Cost of Insurance
Insurance companies charge a monthly premium for their policies. In addition, there are a number of additional fees you need to pay every year or every time you renew your policy. That may sound like a lot of money, but it doesn't have to be.
For many different types of insurance, the premiums will be negotiable based on various conditions. You'll end up saving money on your monthly premiums if the insurance company feels safe that they're not going to pay you a bunch of money.
So for example, if you have a good driving record, and you have a digital device that shows you never exceed the speed limit, the insurance company will offer you discounts. This same type of thinking applies to many different types of insurance. It all boils down to the risk factor for the insurance company.
5) Reimbursements can take time to process.
In many cases, it's not a simple matter of you getting struck by another vehicle, or you fall down the stairs, and the insurance company throws a big bundle of cash at you. There's a process.
It takes time for the insurance companies to reimburse you for all of the expenses you incur, which means you have to file claims. For example, let's say your pet needs surgery. There's a high probability you're going to be paying for that surgery out of pocket, and then waiting for reimbursement.
You have to be prepared when filing claims, which means providing all the evidence that you had no idea this sudden unexpected disaster was going to strike, and you're not committing insurance fraud. For many insurance cases, you’re sort of guilty until proven innocent.