What Insurance Is and What It's Not
Article which explains who insurance is for and who is not for.
Many people believe that buying insurance is a “must,” and many believe that they should buy as much insurance as they can reasonably afford. This may include everything from life insurance and health insurance to homeowner's insurance and car insurance. The fact is that these various types of coverage are beneficial for many people and for many different scenarios, but there is such as thing as being over-insured. Understanding what insurance is and what it's not can help you to maximize the benefits that these different policies can provide to you without buying more coverage than you need.
How Coverage Works
All insurance policies will provide you with certain benefits. For example, health insurance will pay for your medical bills, and life insurance will provide your beneficiary with a payout of death benefits when you pass away. However, all coverage has coverage limits and requirements. For example, most life insurance policies will pay out up to the amount of death benefits you have purchased, but they may not pay out if you commit suicide.
While each insurance policy will have certain coverage limits and requirements, each insurance policy will also have certain costs that you will be responsible for. For example, you will pay a regular premium on all policies you have. A premium is essentially the cost associated with the benefit of having the policy. In order to use the policy, though, you may have to pay a deductible or co-pay, depending on the type of insurance policy in question. For example, before your car insurance policy will pay a dime for your accident-related expenses, you will have to pay the deductible amount in full. So there are costs associated with having the insurance policy, and there are additional costs associated with the benefit of being able to use the insurance policy.
When Insurance Makes Sense
Insurance is designed to protect you from financial liability or excessive expenses. Ideally, the costs of holding and using an insurance policy will be lower than the benefit it provides to you. In order to purchase a policy that makes sense for you, you need to consider what your needs and risks are. For example, many single people who are young and in great health may benefit more fully from a less comprehensive health insurance policy. These are individuals who may rarely visit the doctor or get ill, and they only need coverage to pay for major emergencies and serious illnesses. Insurance makes sense when its cost is low and its comparative benefits are high. It should offer you a regular, on-going benefit or provide you with an affordable way to mitigate risk and liability.
When Insurance Doesn't Make Sense
There are certain times when buying insurance and paying for the regular cost of holding a policy just don't make sense. The premium cost may be high, you may not benefit from the coverages you have purchased or both. For example, a comprehensive car insurance policy will pay for repairs or even the total replacement of your vehicle up to the vehicle's current value. This type of policy can be expensive. If your current vehicle has a low value, you may be paying more for the coverage each year than it will pay out to you even if your car was totaled. Another example is towing coverage on your car insurance policy.
How Coverage Works
All insurance policies will provide you with certain benefits. For example, health insurance will pay for your medical bills, and life insurance will provide your beneficiary with a payout of death benefits when you pass away. However, all coverage has coverage limits and requirements. For example, most life insurance policies will pay out up to the amount of death benefits you have purchased, but they may not pay out if you commit suicide.
Liability car insurance coverage will pay for the expenses of another driver in an accident you caused and only up to a certain dollar amount. This type of coverage will not pay for your own accident-related expenses, and it may not pay for all of the expenses you are liable for. Some health insurance coverage will pay for certain types of prescription drugs but not for others.
Deductibles, Co-Pays and Premiums
Deductibles, Co-Pays and Premiums
While each insurance policy will have certain coverage limits and requirements, each insurance policy will also have certain costs that you will be responsible for. For example, you will pay a regular premium on all policies you have. A premium is essentially the cost associated with the benefit of having the policy. In order to use the policy, though, you may have to pay a deductible or co-pay, depending on the type of insurance policy in question. For example, before your car insurance policy will pay a dime for your accident-related expenses, you will have to pay the deductible amount in full. So there are costs associated with having the insurance policy, and there are additional costs associated with the benefit of being able to use the insurance policy.
When Insurance Makes Sense
Insurance is designed to protect you from financial liability or excessive expenses. Ideally, the costs of holding and using an insurance policy will be lower than the benefit it provides to you. In order to purchase a policy that makes sense for you, you need to consider what your needs and risks are. For example, many single people who are young and in great health may benefit more fully from a less comprehensive health insurance policy. These are individuals who may rarely visit the doctor or get ill, and they only need coverage to pay for major emergencies and serious illnesses. Insurance makes sense when its cost is low and its comparative benefits are high. It should offer you a regular, on-going benefit or provide you with an affordable way to mitigate risk and liability.
When Insurance Doesn't Make Sense
There are certain times when buying insurance and paying for the regular cost of holding a policy just don't make sense. The premium cost may be high, you may not benefit from the coverages you have purchased or both. For example, a comprehensive car insurance policy will pay for repairs or even the total replacement of your vehicle up to the vehicle's current value. This type of policy can be expensive. If your current vehicle has a low value, you may be paying more for the coverage each year than it will pay out to you even if your car was totaled. Another example is towing coverage on your car insurance policy.
This is typically an add-on coverage that you can purchase for a few dollars per month. However, if you rarely get into an accident and otherwise haven't needed towing services in years, this is coverage that may be more costly than beneficial to you. Towing a vehicle usually is not such an expensive service that insurance coverage is needed for it.
The bottom line is that insurance can be very beneficial, but not every type of coverage may be beneficial for your unique needs. In order to avoid buying more coverage than you need, take time to really learn more about the coverage limits and requirements of a policy and determine if the policy will offer you real benefits.
The bottom line is that insurance can be very beneficial, but not every type of coverage may be beneficial for your unique needs. In order to avoid buying more coverage than you need, take time to really learn more about the coverage limits and requirements of a policy and determine if the policy will offer you real benefits.
Article byBill Owen Aviation Insurance experts
