Money Matters - Simplified

The world of insurance

The purpose of insurance is to protect you and your family against any kind of tragedy. It protects a family or an individual from the financial impact of tragedy.

Basically there are two ways to get insurance. One is to go to an agent and tell him all the details and your situation and let him guide you with different policies. The second is to do it yourself. You research the various types of policies available, decide what you need, and then compare various companies. If you go to an agent, he will give you suitable suggestions and guide you properly, provided that he is honest and competent. If you do it yourself, you will pay less for the same amount of insurance.

There are various types of insurance available. Some of them are:

Health insurance

It is very important and one should never go without this. Health insurance comes in three types. Many policies even mix and match the traits of the three.

Fee for service is the most expensive policy. It allows you to go to any provider and covers everything that is medically necessary. You don't have a primary care physician who has to approve visits to specialists.

Preferred provider options (PPO's) allow you to self-refer to any provider in the PPO's list and generally cover a wide variety of services recommenced by those providers. Some PPO's cover other providers, but with a larger co-payment.

Health maintenance organizations (HMO's) are the least costly. However, they are highly restrictive. They assign you (or let you select) a primary care physician. That physician acts as a gatekeeper. He decides when you need a specialist and what is medically necessary for you. Often the HMO itself has to permit certain treatment and can rule against your doctor if it thinks the treatment is too costly.

Life insurance

There are many types of life insurance products available. It is often difficult to understand what kind of protection each policy offers. Learn more about the various types of life insurance products and clarify the differences between these policies. In order to evaluate which life insurance policy will meet your particular needs, it is important to discuss the matter with an agent or advisor. There are numerous factors to evaluate before purchasing life insurance coverage. Some of the many things you should consider include your age, marital status, number and ages of your children, medical history, earning capability, debt ratio, and anticipated financial needs.

When you consider the amount of insurance to buy, consider the following:

1. Most of the life insurance should be on a family member whose salary is important to the family budget.

2. Consider a relatively small life insurance policy on a stay-at-home parent to cover child care and other expenses.

3. Don't buy life insurance on children. Instead, buy life insurance on other family members for the benefit of children.

4. Consider reducing the amount of life insurance you have as you build more financial assets.

Auto insurance

Auto insurance is basically for two needs- to insure against accidents that are caused by you and to insure against damage that others do to you or your car.

If your car is expensive and buying another would wipe you out financially, consider buying comprehensive and collision. If you have an older car and wouldn't get much from the insurance company if it were totaled, don’t buy the policy, Instead, put the money you would have paid for comprehensive and collision toward saving for your next car.

Homeowner’s insurance

It provides insurance against damage to your house or property from natural disasters. Basic homeowner's insurance does not cover the contents, though you can often add it for an additional fee or buy it separately. When buying contents insurance, consider whether it covers replacement value or fair market value. Replacement value is a better buy because it pays to buy a new piece of furniture or appliance.

You can also go for liability insurance which covers you if someone sustains an injury or other loss on your property.

Insurance is a complex subject. Do your own research or work with your agent. Hopefully this article will help you do that more effectively.


The world of insurance

Homeowner's insurance provides insurance against damage to your house or property from natural disasters.