What Is Insurance?
Insurance, as a means of protecting a person's interests against loss or damage has been used for at least 5,000 years -- originally by traders seeking to protect their sea-going cargoes -- but the first real policies, in the way we think of them today, came into being in the 17th Century.
The first true insurance company was founded in the wake of the Great Fire of London in 1666. And, in a way, that tells us something about the way some people look at insurance: they don’t worry or think about it until something awful happens and, by then of course, it's usually too late. Insurance, after all, is about pooling your money with lots of other people so that, if things do go wrong, you can recover what you lost or pay for particular health services like healthcare without it costing you a fortune. You can't do that after that fact!
Naturally, you, and we, hope disaster never strikes. But if it doesn't, you should never think of that premium money as having been wasted; that wasn't the reason you were paying in the first place. In a sense, you are buying security and peace of mind based on the fact that none of us knows what awaits us around the corner.
10 Key Benefits
When you take out an insurance policy, depending on the risk you are covering, some of the benefits you might gain include:
- You reduce or eliminate the risk of facing sudden, major expense if you, your family or your property suffer a misfortune.
- You have the funds to meet the costs of any liability claims made against you, when you get blamed for someone else's misfortune.
- You create security for yourself and your family in the event that you lose your earning power through job loss or disability.
- You provide financial security for your family in the event of your death.
- You are covered if someone else who isn't insured injures you or damages your property.
- You have the best chance of quickly recovering your lifestyle after damage to your property, with someone taking care of you while restoration or replacement is under way.
- You improve your credit-worthiness by being recognized as a responsible citizen, and may even be able to raise funds on the security of a policy.
- If you're in business, you can insure against risks that otherwise might not allow you to compete against bigger, financially stronger contenders.
- You can protect yourself against the damage caused by some of the modern financial crimes, which are otherwise difficult for you to understand and assess – like identity theft.
- By contributing to insurance companies you are sharing in the cost of researching ways to improve our lives, making them safer and reducing risks.
Different Types Of Insurance Coverage
These days you can insure against almost any risk and uncertainty you're likely to encounter in everyday life. Here are the main types of coverage you might consider for yourself:
Life Insurance: There are two main types - permanent policies that pay out whenever the insured person dies and term policies that pay if death occurs within a specified period (usually 10 or 15 years). Because the first type is a guaranteed payment, coverage obviously costs more. But premiums of both types of policy depend on your age when you take it out, your gender (women live longer than men) and your general health.
Homeowners' Insurance and Renters' Insurance: There is a huge variety of insurance policies you can take out to cover risks associated with your home. Obviously, if you own your home, you want to insure the buildings against loss, as well as the contents. But if someone else owns the place, your interest is in protecting your possessions rather than the structure. That's the key difference between homeowners' and renters' insurance coverage.
A standard homeowners' insurance policy covers you against losses caused, for example, by fire, storm or theft but, usually, not earthquakes or natural flooding, for which you need separate coverage. They also cover liability for injuries or damage you cause to others and may provide living expenses while your home is being repaired or rebuilt.
When taking out a policy to cover contents, it's worth taking a quick inventory of your possessions. Also make a note of serial numbers of electronics items and take photographs in each room, which will help jog your memory in the event that you have to make a claim. As a rough guide, cover for possessions usually works out around half the value of your structural coverage.
Auto Insurance and Other Vehicles: Auto insurance is a legal requirement for most vehicles and in most circumstances. Rates vary greatly according to factors like the age of the insured and their driving record, location and, of course, type of vehicle. A basic policy covers you for injuries to you and anyone injured in an accident and vehicle damage or theft. You're also normally covered when driving a vehicle you don’t own (as long as you have permission) and for injury or loss caused by another driver who's not insured. Special policies are available for owners of RVs and motorcyclists.
Medical Insurance, Disability Insurance and Long Term Care Insurance: Most policies, whether employer-provided or self-purchased, pay for health treatment, less any deductible or co-pay stipulated by the policy. High deductibles -- sometimes for the first $10,000 of costs -- substantially reduce premiums because they only kick in for what's normally regarded as catastrophic cover. You can also get cheaper policies that exclude certain categories of treatment. Another lower-cost option type of policy, known as HMOs (Health Maintenance Organizations), permits you to select your primary care physician but requires a referral from that physician before you can see a specialist. More flexible but slightly more costly are PPO (Preferred Provider Organization) policies that allow you to choose who you see for most types of medical attention.
Coverage for disability requires a separate policy. Its basic aim is to maintain a level of income if you become unable to work. For work-related injuries, you may be entitled to mandatory Workers' Compensation Benefits, but for injuries off the job, you possibly need to arrange your own coverage (though a few firms also pay for this).
Long Term Care policies provide assistance or accommodation when a policyholder is unable to perform, without help, two or more of what are called Activities of Daily Living (ADLs) - eating, bathing, toileting, getting in and out of a bed or chair, continence and dressing. Depending on the policy, you may be covered for care in a nursing home, an assisted living facility, or in a day care center or even at home. And the cover may be for a specific period or indefinite. You can choose when you take out a policy.
Insurance for Business: Coverage starts with a Business Owners' Policy (BOP) which usually protects property for risks similar to those of homeowners, disruption caused by an accident, and liability for injuries or damage your employees cause to others. Depending on the nature and size of your business, you may also need professional liability coverage, a commercial auto policy or Workers' Compensation Insurance. Other options include Key Person Insurance, which covers you against the loss of a person on whom a business is heavily dependent.
Do You Need It and Is It Worth It?
Obviously, in our opinion the answer is undoubtedly "YES". Here are just a few of the reasons why:
- An average of more than one in every hundred homes suffers serious damage each year mostly caused by fire and weather events.
- Earthquakes have hit 39 states since 1900 and caused damage in all 50 states.
- Almost one half of all people in the second half of their working lives will suffer a disability lasting more than 90 days before reaching retirement age.
- Most people who reach retirement age will need some level of Long Term Care in their later lives – 58% of men and 79% of women.
- More than two million homes are burglarized every year, and more than a million cars are stolen
- The cost of medical care is rising considerably faster than the rate of inflation. Thousands of people die every year because they don't have insurance cover.
Can I Cut My Insurance Costs?
Again, almost certainly "YES", if you haven’t already consulted us about how to do this. For example, higher deductibles will reduce premiums. With some auto insurance policies, age, mileage and driving record can be used to lower premiums, while certain homeowners' insurance policy providers will take account of security systems you've installed when considering a lower premium. Sometimes, you may also earn discounts by having more than one policy from the same insurer.
Certainly, it always makes sense to keep your insurance coverage under review, to take account of your changing needs and circumstances.
For all of the reasons outlined in this report, you may want to contact us to arrange a chat. We may be able to save you money or suggest different types of coverage to that which you already have. Perhaps we won’t be able to do either of these things because you already have the best, lowest-cost policies in place. In which case, we'll be able to give you the peace of mind of know it!
Huff Insurance is a full service Independent Insurance Agent We have been dedicated to Protecting Lifestyles™ since 1960. We offer a full array of Personal Insurance, Commercial Insurance and Life Insurance & Health Insurance products. Call us at 410-647-111