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Inusrance: Definition and importance

  What Is Insurance? Insurance is a way to manage your financial risks. When you buy insurance, you purchase protection against unexpected financial losses. The insurance company pays you or someone you choose if something bad occurs. If you have no insurance and an accident happens, you may be responsible for all related costs. 1 Why Is Insurance Important? Insurance helps protect you, your family, and your assets. An insurer will help you cover the costs of unexpected and routine medical bills or hospitalization, accident damage to your car or injury of others, and home damage or theft of your belongings. An insurance policy can even provide your survivors with a lump-sum cash payment if you die. In short, insurance can offer peace of mind regarding unforeseen financial risks. Is Insurance an Asset? Depending on the type of life insurance policy and how it is used, permanent or variable life insurance could be considered a financial asset because it can build cash value or be convert
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Types of Insurance

  There are many different types of insurance. Let’s look at the most important. Health Insurance Health insurance helps covers routine and emergency medical care costs, often with the option to add vision and dental services separately. In addition to an annual deductible, you may also pay  copays and coinsurance , which are your fixed payments or percentage of a covered medical benefit after meeting the deductible. However, many preventive services may be covered for free before these are met. 5 Health insurance may be purchased from an insurance company, an insurance agent, the federal Health Insurance Marketplace, provided by an employer, or federal Medicare and Medicaid coverage. The federal government  no longer requires Americans  to have health insurance, but in some states, such as California, you may pay a tax penalty if you don't have insurance. 6 Home Insurance Homeowners insurance  (also known as home insurance) protects your home, other property structures, and person
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INSURANCE POLICY COMPONENTS

  Policy Limit The policy limit is the maximum amount an insurer will pay for  a covered loss  under a policy. Maximums may be set per period (e.g., annual or policy term), per loss or injury, or over the life of the policy, also known as the lifetime maximum. Typically, higher limits carry higher premiums. For a  general life insurance policy , the maximum amount that the insurer will pay is referred to as the face value. This is the amount paid to your beneficiary upon your death. The federal  Affordable Care Act  (ACA) prevents ACA-compliant plans from instituting a lifetime limit for essential healthcare benefits such as family planning, maternity services, and pediatric care. 4 Deductible The  deductible  is a specific amount you pay out of pocket before the insurer pays a claim. Deductibles serve as deterrents to large volumes of small and insignificant claims. For example, a $1,000 deductible means you pay the first $1,000 toward any claims. Suppose your car's damage totals
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Insurance Policy Components

  Understanding how insurance works can help you choose a policy. For instance, comprehensive coverage may or may not be the right type of auto insurance for you. Three components of any insurance type are the premium, policy limit, and deductible. Premium A policy’s premium is its price, typically a monthly cost. Often, an insurer takes multiple factors into account to set a premium. Here are a few examples: 3 Auto insurance premiums : Your  history of property and auto claims , age and location,  creditworthiness , and many other factors that may vary by state. Home insurance premiums : The value of your home, personal belongings, location, claims history, and coverage amounts. Health insurance premiums : Age, sex, location, health status, and coverage levels. Life insurance premiums : Age, sex, tobacco use, health, and amount of coverage. Much depends on the insurer's perception of your risk for a claim. For example, suppose you own several expensive automobiles and have a histo
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How Insurance Works

  Many insurance policy types are available, and virtually any individual or business can find an insurance company willing to insure them—for a price. Common   personal insurance policy types   are auto, health, homeowners, and life insurance. Most individuals in the United States have at least one of these types of insurance, and car insurance is required by state law. Businesses obtain insurance policies for field-specific risks, For example, a fast-food restaurant's policy may cover an employee's injuries from cooking with a deep fryer. Medical malpractice insurance covers injury- or death-related liability claims resulting from the health care provider's negligence or malpractice. A company may use an insurance  broker of record  to help them manage the policies of its employees. Businesses may be required by state law to buy specific insurance coverages. 2 U.S. SBA. " Get Business Insurance. "
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WHAT IS INUSRANCE?

  Insurance: Definition, How It Works, and Main Types of Policies What Is Insurance? Insurance is a contract, represented by a policy, in which a policyholder receives financial protection or reimbursement against losses from an insurance company. The company  pools clients’ risks  to make payments more affordable for the insured. Most people have some insurance: for their car, their house, their healthcare, or their life. Insurance policies  hedge  against financial losses resulting from accidents, injury, or property damage. Insurance also helps cover costs associated with liability (legal responsibility) for damage or injury caused to a third party.
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