Skip to main content

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 converted into cash. Simply put, most permanent life insurance policies have the ability to build cash value over time.11

The Bottom Line

Insurance helps to protect you and your family against unexpected financial costs and resulting debts or the risk of losing your assets. Insurance helps protect you from expensive lawsuits, injuries and damages, death, and even total losses of your car or home.

Sometimes, your state or lender may require you to carry insurance. Although there are many insurance policy types, some of the most common are life, health, homeowners, and auto. The right type of insurance for you will depend on your goals and financial situation.

Comments

Post a Comment

Popular posts from this blog

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.
Post a Comment
Read more

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
Post a Comment
Read more