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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.

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