1. Intro to Insurance: Introduction
  2. Intro to Insurance: What Is Insurance?
  3. Intro to Insurance: Fundamentals of Insurance
  4. Intro to Insurance: Property and Casualty Insurance
  5. Intro to Insurance: Health Insurance
  6. Intro to Insurance: Disability Insurance
  7. Intro to Insurance: Long-Term Care Insurance
  8. Intro to Insurance: Life Insurance
  9. Intro to Insurance: Types of Life Insurance
  10. Intro to Insurance: Life Insurance Considerations
  11. Intro to Insurance: Other Insurance Policies
  12. Intro to Insurance: Conclusion

Let’s review the key points from the insurance tutorial you’ve just read:

Insurance is a contract between an individual (the policyholder) and an insurance company. This contract provides that the insurance company will cover some portion of a policyholder’s loss as long as the policyholder meets certain conditions stipulated in the insurance contract. The policyholder pays a premium to obtain insurance coverage. If the policyholder experiences a loss, such as a car accident or a house fire, the policyholder files a claim for reimbursement with the insurance company.

When you buy an insurance policy, you’re pooling your loss risk with the loss risk of everyone else who has purchased insurance from the same company. It only makes sense to purchase insurance to cover significant losses you can’t easily afford on your own. When you carry the right types of insurance in the right amounts, you’ll be protected against potentially catastrophic losses that could send your life veering off course and devastate your finances.

If you can’t eliminate a particular risk from your life, then you should try to prevent, minimize or avoid it while purchasing insurance to protect against the unforeseeable aspects of that risk.

Some types of insurance are required. Mortgage lenders require borrowers to carry homeowners insurance. Other types of insurance are optional. No one will make you buy life insurance, disability insurance, personal liability umbrella insurance or long-term care insurance. You might want to have some types of optional insurance anyway to protect yourself, your family and your finances.

Sometimes insurance is unavailable for the risk you want to insure because the risk is so high or the potential loss is so large that insurers can’t afford to cover it. Sometimes insurance is available through high-risk pools or specialty insurance companies in these situations; such coverage is often expensive.

You can buy insurance directly from an agent who works for a specific insurance company or from an insurance broker who is authorized to sell policies for many different insurance companies. You can also buy insurance directly through an insurance company’s website or through a website that offers policies from numerous insurance companies and allows you to compare prices. When you apply for a policy, an insurance underwriter will evaluate your underwriting risk before deciding whether to issue a policy to you and at what cost.

Property insurance protects the things you own. Casualty insurance protects you financially in the event that someone sues you. The two are often referred to collectively as property and casualty insurance because the things you own have the potential to harm people in ways that could cause them to sue you. Examples of property and casualty insurance include homeowners insurance, renters insurance, automobile insurance and umbrella insurance.

Health insurance helps to protect you from not being able to afford the healthcare you need and from the extreme financial burden of paying for 100% of your healthcare out of pocket. Under the Affordable Care Act, all health insurance policies must cover 10 essential health benefits. In addition, everyone is required to carry basic health insurance or pay a fine. You can purchase group health insurance through your employer, if your employer offers health insurance as a benefit. You can also buy health insurance through the health insurance marketplace, also known as the exchange, directly from an insurance company, or through a health insurance broker who shops around for plans on your behalf.

In addition to covering the 10 essential health benefits – doctor’s office visits, hospitalization, emergency services, laboratory services, mental health services and addiction treatment, rehabilitative services and devices, pediatric services, prescription drugs, and preventive wellness and chronic disease treatment, and maternity and newborn care – each category’s specific covered services may vary based on state requirements and based on the specific insurer and plan. Some of these requirements may change if the Affordable Care Act is altered or repealed.

Disability income insurance, also called disability insurance, protects your income if you become unable to work for several months or longer due to illness or injury. The income provided by a DII policy can help you maintain your standard of living and pay your medical bills while you recover – or pay them until the policy terminates, which may be at age 65 or when you die, if you don’t recover. Although the federal government may pay benefits if you become disabled, it has has strict definitions of disability and low monthly benefit payments. While SSDI is certainly better than nothing, since not everyone will qualify for it or be able to maintain their usual standard of living off its benefits, private disability insurance is an appealing substitute or complement. Since you could become disabled at any point in your life, it’s a good idea to purchase disability income insurance as soon as you start earning substantial income from work.

Long-term care (LTC) insurance is designed for individuals who need help with basic activities of daily living such as bathing, getting dressed and eating. About half of Americans who turned 65 in 2015 will need long-term care services, according to the U.S. Department of Health and Human Services. A hip fracture, a stroke, or another serious illness or injury could make it impossible to carry out tasks we take for granted when we’re healthy. This type of round-the-clock assistance is expensive, but long-term care insurance can cushion the blow.

People who have few or no assets don’t need to buy long-term care insurance because they will qualify for Medicaid. People who have such a gigantic nest egg that they will easily be able to afford whatever care they need also don’t need to worry about buying long-term care insurance. It’s the vast majority of people who fall somewhere in between who should consider it – people whose nest eggs would be devastated by the cost of long-term care. Individuals must go through medical underwriting to qualify for a long-term care insurance policy.

Life insurance is designed to provide financial security for relatives of the deceased, most commonly spouses and children. If you support someone with your income or your time – and they won’t be able to provide that support for themselves without you – then you need life insurance. Life insurance is supposed to make sure that anyone who depends on the insured for income or day-to-day support will be financially provided for when the insured dies. Children rarely need it. Young adults may want to purchase it to lock in low premiums while they are healthy if they plan to get married or have children one day.

Adults who have children should almost always carry life insurance because without the adult’s income and caregiving, the child has no means of support. Married couples or long-term partners who do not have children and do not plan to have children may or may not need life insurance. It depends on how much each partner relies on the other for financial support and what assets and financial obligations one partner would leave the other with upon death. The three main types of life insurance are term, whole and universal; there are several variations on these categories, but term life insurance will meet most people’s needs at an affordable price. Death benefits can be paid as a lump-sum distribution or via installment option.

Insurance products such as health insurance, life insurance and homeowners or renters insurance almost always make sense to buy. Beyond these large, popular categories of insurance lie many other types of policies that only a few people need or that are usually a poor use of your money. Types of insurance that fall into these categories include critical illness insurance, kidnap insurance, identity theft insurance, credit insurance, cell phone insurance and pet insurance.

Now that you’re well-versed in insurance, consider educating yourself on another topic that’s essential to your financial security. Check out our Budgeting Basics tutorial or our Retirement Planning Basics tutorial.


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