Understanding Types of Insurance Essential ?: Why is insurance necessary?

What is Insurance? An arrangement between an individual (consumer) and an insurer (insurance company) to protect the individual against risk.

Purpose of Insurance Limits financial loss. Prepares for the unexpected. Transfers part of the risk of financial loss to the insurance company.

Insurance Terminology Policy – contract between individual and insurer specifying terms of insurance arrangement. Premiums –fee paid to the insurer to be covered under the specified terms.

Terminology Cont… Deductible –amount paid out of pocket by policy holder for portion of a loss before insurance coverage begins. Policyholder –consumer who purchased policy.

Types of Insurance: Automobile Health Life Disability Homeowner’s/Renter’s

1. Automobile Insurance Purpose of auto insurance is to help individuals limit their financial losses when an auto accident occurs. Insurance Education Foundation (IEF) states there is 70% chance a person will be involved in an auto accident within the first three years of driving.

2. Health Insurance Health care costs are extremely high. Large medical expenses can wipe out savings. Health insurance provides protection against financial losses resulting from injury, illness, and disability. Purpose is to provide coverage for medical expenses, emergency and routine.

3. Life Insurance 70% of American adults have life insurance. Life insurance provides money for family members or dependents when a wage earner dies. Dependent is a person who relies on someone else financially.

5. Homeowner’s/Renter’s Insurance Property and liability insurance policy will protect a home from damage costs due to perils. Peril is an event which can cause a financial loss. Fire Falling trees Lightning Others