The board game Life always made the troubles yet-to-come seem so simple. From cars to homes to family life, fake colored money covered it all. However in real life, insurance can sound like a big, scary word, associated with paying a lot of money for some kind of service. If you understand the various types of insurance and how they protect not only your assets like your car and home, but your own well-being, it makes the giant, scary, insurance monster a little less intimidating.
Homeowners Insurance: As the name implies, homeowners insurance is insurance for your home. The coverage of the insurance can vary based on the policy and provider, however insurance will usually cover the same basic things: the home structure itself, your belongings, liability, and other expenses that may cause you to no longer live in your home for a rebuild or reconstruction. Typically a percentage of the total amount of your policy will apply for these basic conditions. The coverage you take out will have specific percentages and clearly define the limits of you policy. Even if you don’t own your own place, Renters Insurance covers your personal belongings.
Automobile Insurance: Car insurance is required in almost all states, but the amounts of liability coverage depend from state to state. When you purchase insurance, you should understand the types of insurance that your state requires from the many types of coverage that are offered. In Arizona, for example, the state requires a driver to have a liability insurance policy that covers damage you would cause another person in an accident. Other types of insurance are Comprehensive which covers damage that may be caused in storms or other situations not involving other vehicles, Collision insurance which would pay for damage to your car in an accident, and others. A deductible is a basic component of any car insurance policy, which is an amount you are required to pay upfront in the event of an accident. If you have for example a $500 deductible, in the event of an accident, you must pay $500 to the insurance company to cover the costs of the damage.
Health Insurance: Health insurance is usually offered by your employer or as a college student, you may be covered by your parent’s plans or through a campus health offering. However, to understand it a little better, it's important to know the basics of two types of insurance: HMO's or health maintenance organizations and PPO's or preferred provider organizations. HMO plans are paid for at fixed rates over time and offer a wide range of medical treatments, but if the person chooses a doctor outside of the HMO care providers, the costs are not covered by the insurance policy. PPO plans are paid for by the person every time a medical service is used. The person is not restricted to a network of care providers, but incentives may be offered to those who use doctors who are in the network.
Life Insurance: There are typically two kinds of basic life insurance; term life and permanent life insurance. Term life is insurance that is purchased for a set amount of time. If the person lives to the end of the coverage, a new policy is purchased at a rate that continually increases. If the person does pass away before the term is over, the face value of the insurance goes to the dependents of that person. Permanent life insurance is different in the fact that it provides coverage for your entire life, although it is more expensive. With this type of insurance, an account is essentially built within your policy that can be used later in life to pay your insurance premiums or accessed by the person with the coverage.
Disability Insurance: This type of insurance is usually needed later in life when you have an established career. Many companies that you may work for will offer disability insurance, but it is something that can be owned separately from the company policy if you wish. Disability insurance compensates your wages that would be lost should you be hurt in an accident and unable to work. Short term disability covers you in cases where your injury would only prevent you from working for a short time, whereas long term disability covers you in cases where you could no longer work in the same field due to injury or could no longer work at any job due to injury.