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. 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 Types Of Insurance Everyone Needs

    Here are four forms of insurance that are vital to have.
  2. 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.
  3. 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.
  4. Financial Advisor

    Buying a Life Insurance Policy? Read This First

    Knowing who needs life insurance, how it works and the different types of insurance can help consumers make informed decisions about this product.
  5. Financial Advisor

    7 Issues to Consider When Determining Life Insurance Coverage

    Seven issues to consider when buying life insurance to ensure the coverage is tailored to meet your personal financial situation.
  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.
RELATED TERMS
  1. Personal Lines Insurance

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

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

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

    Total insurable value is the value of property, inventory, equipment, ...
  5. Term Life Insurance

    A policy with a set duration limit on the coverage period instead ...
  6. Insurance Coverage

    The amount of risk or liability covered for an individual or ...
Hot Definitions
  1. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  2. Promissory Note

    A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on ...
  3. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  4. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  5. Absolute Advantage

    The ability of a country, individual, company or region to produce a good or service at a lower cost per unit than the cost ...
  6. Nonce

    Nonce is a number added to a hashed block, that, when rehashed, meets the difficulty level restrictions.
Trading Center