A:

Individuals can transfer the risk of financial loss from a wide variety of sources to a third party through the purchase of an insurance policy. In exchange for a premium, an insurance company provides financial protection in the event income is lost due to death or disability; a medical condition results in burdensome expenses; or theft or damage occurs to property. The major types of insurance coverage available to consumers to protect from these common occurrences include life, disability, health, property, home and auto insurance.

The ability to earn an income is one of the greatest assets an individual can possess. Both life insurance and disability insurance are available to cover the potential loss of earned income due to death or debilitating short- or long-term disability. Life and disability insurance policy premiums are based on age, gender and current health of the individual applying for coverage, and each policy can come in different forms that also affect premiums. For instance, term life insurance provides coverage on the insured's life only for a set number of years before it expires, and therefore it is less expensive than permanent or cash value life insurance policies.

Health insurance helps offset the cost of medical care due to an accident or injury, and policies often cover preventative screenings or exams; a portion of hospital costs; and some prescription drugs. The premiums associated with health insurance are based on age, gender and past medical history, and the insured may be required to satisfy a deductible before full benefits are paid. Without health insurance coverage, individuals are left to absorb the exorbitant costs of medical care for both routine exams and emergency situations.

Property, home and auto insurance provide coverage for an individual's possessions up to certain limits and may impose a deductible before benefits are paid. Homeowners, renters and vehicle owners are required to purchase coverage due to the high cost of replacing valuable items in the event of damage or theft. Insurance premiums for property, home and auto policies are based on the value of the underlying asset and the insured's risk profile.

RELATED FAQS
  1. What is the average return on total revenue for the insurance sector?

    Learn about the three main segments of the insurance industry, and find out what the average return on revenues is for the ... Read Answer >>
  2. Why is my insurance premium so high/low?

    Insurance premiums can be affected by many factors including: type and amount of risk size of deductible amount of coverage ... Read Answer >>
  3. What are some examples of when insurance bundling is a bad idea?

    Learn about situations where insurance bundling may not be a favorable option. Bundling insurance is often a good idea, but ... Read Answer >>
  4. Which insurance policies do I really need?

    Your needs for insurance depend on your situation and can't be generalized for everyone, but there are a lot of options available. ... Read Answer >>
Related Articles
  1. Insurance

    4 Reasons Why Waiting To Buy Life Insurance Is a Bad Idea

    Understand the benefits of applying for and securing life insurance coverage while you are young and healthy, and learn the cost of waiting to get coverage.
  2. Insurance

    Term Life Insurance: Everything You Need to Know

    Term life insurance is an affordable way to financially protect your loved ones after your death. Here's what you need to know before purchasing a policy.
  3. Insurance

    Do You Need Casualty Insurance?

    Find out how different types of coverages can protect you and which policy is right for you.
  4. Financial Advisor

    Who Should Buy a Guaranteed Issue Life Insurance Policy?

    Guaranteed issue life insurance policies have added costs and reduced benefits that make them suitable for only a limited pool of buyers.
  5. Insurance

    How to Protect Your Income No Matter What

    What does it mean to insure your income? Here are a variety of ways to do it and some insights into when it might make sense to invest in income insurance.
  6. Insurance

    Life Insurance: putting a Price on Peace of Mind

    Would your death leave loved ones financially stranded? Find out how to ease your mind and keep them protected.
  7. Insurance

    4 Things That Keep You From Getting Life Insurance

    We look at four common reasons people give for not applying for life insurance, and see if they're legitimate.
  8. Financial Advisor

    Getting Life Insurance in Your 20s Pays Off

    Find out how Americans in their 20s can benefit from a well-thought-out life insurance policy, especially if they are able to build cash value for retirement.
  9. Investing

    Methods of Handling Risk: A Quick Guide

    Discover the five methods to manage pure risk, and learn how they can be implemented to mitigate risk with health and life insurance.
RELATED TERMS
  1. Personal Lines Insurance

    Property and casualty insurance products for individuals that ...
  2. Insurance

    A contract (policy) in which an individual or entity receives ...
  3. Classified Insurance

    Insurance coverage provided to a policyholder that is considered ...
  4. Life Insurance

    A protection against the loss of income that would result if ...
  5. Total Insurable Value

    Total insurable value is the value of property, inventory, equipment, ...
  6. Insurance Premium

    The amount of money that an individual or business must pay for ...
Hot Definitions
  1. Money Market

    A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. ...
  2. Block (Bitcoin Block)

    Blocks are files where data pertaining to the Bitcoin network is permanently recorded.
  3. Fintech

    Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century.
  4. Ex-Dividend

    A classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be ...
  5. Debt Security

    Any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount ...
  6. Taxable Income

    Taxable income is described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments ...
Trading Center