Insurance companies offer many different products, each of them offering some type of protection against loss to the policyholder in exchange for premium payments. Each provides benefits by reducing the consumer's risks and inspiring increased peace of mind. Additionally, in some cases, people or businesses are required to have certain types of insurance in order to protect others.
An insurance policy pays you or the designated recipient when a covered loss is realized. The drawback to buying insurance, in many cases, is that you're paying for something you hope you'll never have to use.
Drivers may choose from several types of automobile insurance policies, each offering different benefits. In all states except New Hampshire, some level of auto insurance is required in order to legally operate a motor vehicle. The minimum coverage in most places – referred to as PLPD, for personal liability and property damage – is designed more as a protection for others than for the policyholder and will pay if you harm someone or damage something while driving the covered vehicle. In some states, PLPD insurance includes personal injury protection, which protects you by covering your medical expenses if you are injured while driving the covered vehicle.
Other types of policies expand your coverage to cover other situations. Collision insurance protects you by repairing or replacing your car if you get into a wreck. Comprehensive policies cover other damages, such as if someone vandalizes it or if a window breaks in a hailstorm.
Homeowner and Renter's Insurance
Homeowner's insurance carries several benefits. The main one is that it will pay to repair or replace your home if it is damaged or destroyed by causes explicitly covered in the policy. Many policies also protect the valuables inside your home if they are stolen. Be aware that some damages – often including those caused by earthquakes and floods – usually are not covered without a separate policy.
Renter's insurance is designed to protect your valuables, as opposed to the dwelling itself. If you own renter's insurance and your valuables are destroyed or damaged by any covered causes, the policy will pay you the value of the items lost, up to the face value of your policy.
Medical insurance protects you against high health care costs by paying for all or part of your medical expenses, based on the terms of the policy. Since the passage of the Affordable Health Care Act, all Americans are required to obtain some form of health insurance through their employers, government health care exchanges, a private insurer or the Medicare or Medicaid systems. Those who fail to do so are subject to a fee based on their income.
Benefits of Life Insurance
Life insurance is intended to benefit your dependents, loved ones or whomever else you name as your beneficiary when you die. There are many types of life insurance, with varying benefits, but the main benefit of a life insurance policy is that it will pay the face amount – the amount of the policy – to the beneficiary if you pass away while the policy is in force. This money often is used to cover your final expenses.
People often purchase larger life insurance policies for any number of reasons, the most common being to ensure that their debts are paid off, to provide continuing income to dependents or to cover the cost of children's education. Some life insurance policies also accumulate cash value, which may be borrowed against or which may be collected if the policy is cashed out and canceled.
Dell Markey is a full-time journalist. When he isn't writing business spotlights for local community papers, he writes and has owned and operated a small business.