Welcome to Insurance 101 where we will take the time to learn the basic concepts of coverage and how insurance works. To start, know that we all need insurance. Life does not discriminate and we should all prepare for the unexpected.
So, no matter what walk of life you are in, this class is for you.
Let’s begin with the primary purpose of insurance. We insure things we want to protect. When we have something of value, something we can’t afford to replace, we pay monthly to relieve the financial burden knowing that the responsibility is now on the insurance company.
Insurance shifts the financial burden from you to the insurance company.
We understand insurance isn’t the most exciting topic and none of us love paying for it. However, by having an understanding of the basics you will be equipped to choose the right policies that will protect your lifestyle, assets, and property.
In order to understand the different types of policies, we first need to know a few different terms. We will go more in depth on insurance vocabulary in our class, Technical Terms and Talk, so be sure to check that out!
For now, let’s learn how insurance works. When you purchase an insurance policy, you agree to make monthly, quarterly, or annual payments, called premiums, to a provider in exchange for coverage. The amount of coverage, cost of a deductible, liability, and other terms are all decided based on the policy you choose.
The policy is an agreement between you and the insurance company on what will be covered if loss occurs.
The idea is that by spreading the risk of loss across long periods of time and among many people, it lowers the risk of financial burden for all.
This is the foundation of how all different types of insurance policies work. So, let’s discuss the different types of policies.
There are two main types of insurance policies, personal and commercial. Personal insurance policies cover things such as damage to your own properties, mishaps, illnesses, and death, whereas, commercial insurance policies protect businesses, employees, and owners.
Let’s get into the basic types of personal insurance.
1. Residential insurance. This includes homeowners insurance, renters insurance, and other related policies such as condo or co-op insurance.
Home insurance will often cover your home and other buildings on your property, as well as the contents inside. It should also include things like liability protection, temporary structures, and living expenses if you need to vacate after a loss.
Renters insurance is important because the property owner's insurance does not cover replacement costs of your own belongings, it is simply for his or her building. Renters policies are very affordable and absolutely worth it when it comes to protecting your possessions.
2. Vehicle Insurance
There are many options when it comes to coverage for your car, boat, motorcycle, or other vehicles. Like other types of insurance, vehicle insurance is important so that in the case of an accident, damage and repairs may be covered. Policies range from liability to comprehensive to collision and often depend on state laws and requirements. Each policy is different and the cost may vary depending on your deductible, age, the make, model and year of the vehicle, driving history, the state you live in, and the type of insurance you purchase.
If you need assistance assessing what type of vehicle insurance will be best for you, please give us a call.
3. Health, Life, and Disability Insurance
In case of illness, injury, or even death it is important to carry these types of insurance. Even if you think you are a generally healthy individual, medical emergencies can happen and they can be a big financial burden. Additionally, losing a loved one brings enough pain of its own. We don’t want to leave our loved ones with large medical bills or funeral costs.
Some employers will offer health, life, disability, or long-term care coverage. However, in the event that these policies are not sufficient you should discuss other options with an insurance provider.
Tip: If you are in need of a few different types of personal insurance policies, you may be able to save money by bundling with the same provider.
As previously mentioned, commercial insurance protects your business from risk. Policies will differ between the different types of business, what coverage is necessary, the size of the company, and a variety of other factors. Commercial insurance policies will be individually designed to protect the specific risks your company may face.
As we’ve learned there are many different types of insurance and an endless amount of options when it comes to choosing the right policy for you. The important thing to remember is, everyone needs insurance in order to relieve the stress of losing a valuable asset. It may be required by law or your lender at times, but even when not required you should save you and your family the financial burden and buy the policy. It’s a small price to pay in comparison.
When assessing what type of coverage you need, there are a few things to ask yourself.
Where do you place your value?
What items, vehicles, properties, and other things do you own that may be expensive to replace?
Do you have an emergency fund?
What will you do in the event of an accident, illness, or even death? How will this affect your family?
How much of a financial burden can you assume on your own without coverage?
Will you be able to afford a higher deductible in order to reduce payments?
Do you have specialty items and/or a business that should be covered outside of your personal policies?
Each insurance need varies based on the individual, your assets, goals, and responsibilities. Given the variety, it is important to discuss what you want out of your policy with a professional.
Until then, we encourage you to take the quick and easy 5-Minute Coverage Check.
We’ve enjoyed having you in class and we look forward to learning even more together.