As part of your financial planning, one of the most important components to remember is insurance. Many people do not take the necessary precautions to insure themselves, and it could end up costing them a substantial amount of money. You need several different types of insurance if you want to live a comfortable financial existence.
The primary reason that you need to buy insurance is to transfer risk. Insurance allows you to transfer financial risks from yourself to an insurance company. The insurance companies prepare for this risk because they charge premiums to their customers and keep a large amount of money in reserve. When a customer files a claim, the insurance company has the money there to pay it. This allows you to focus on other things instead of worrying about possible losses.
One of the biggest benefits of owning an insurance policy is that it can protect your property. When you own an expensive piece of property, you want to make sure that you do not lose it to some type of damage. This is what auto insurance policies and homeowners insurance policies are for. They allow you to have your property replaced or repaired if some type of damage occurs. It makes it possible for you to avoid saving money for these expenses on your own.
Protect Your Family
If you have a family, you may also want to buy insurance products that can protect them if you are unable to do so. This is the ultimate purpose of life insurance. If you die, life insurance will provide your beneficiaries with a lump sum of money. This money can be used to replace your current income and to help pay off any outstanding debts that you may have left behind. Without this type of insurance, your family may have serious financial problems after you are gone.
Many people also buy insurance so that they can limit the amount of out-of-pocket expenses related to health-care costs. With today's health-care system, an individual could easily go bankrupt if she did not have health insurance. Serious procedures can cost thousands of dollars; without a good insurance plan, this could have to come out of your pocket. You could cover these risks by purchasing comprehensive health insurance, dental insurance, vision insurance and even long-term-care insurance.
- PT Money: Different Types of Insurance: Do You Have What You Need?
- My Total Money Makeover: The Importance of Insurance
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- Insurance Information Institute. "Understanding the Insurance Claims Payment Process." Accessed June 30, 2020.
- LifeHappens. "Disability: Who Needs It?" Accessed June 30, 2020.
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- LIMRA. "2020 Insurance Barometer Study." Accessed June 9, 2020.
- LIMRA. “More than Half of American Adults Say Loss of Primary Wage Earner Would Have Financial Impact within a Year.” Accessed June 7, 2020.
Luke Arthur has been writing professionally since 2004 on a number of different subjects. In addition to writing informative articles, he published a book, "Modern Day Parables," in 2008. Arthur holds a Bachelor of Science in business from Missouri State University.