Insurance protects you from potential financial loss. The premiums paid for a policy cover the cost of the services provided by the insurance company.
Insurance is a calculated bet. When you are uncertain about whether you will lose money when you buy something like a house or a car, you can use insurance as a bet to hedge against a potential loss.
In other words, if there is a storm that causes home damage or if you’re in a car accident, then your insurer will cover the damage. While you might be familiar with health insurance, car insurance, and home insurance, there are many more diverse types of insurance you can buy to protect yourself.
Life insurance is one of the most important contracts in life — it helps your family stay financially secure should anything happen to you as the primary breadwinner.
If you become terminally ill, you may be entitled to receive a lump-sum payment depending on the contract; or in the event of your unexpected death, your family will be entitled to payments.
When buying coverage be sure to understand how your insurance premium works. You need to find the right balance between choosing an amount that you can afford to pay every month and getting sufficient coverage to protect your family should anything happen to you.
Insurance to Renovate Your Home
Standard homeowners’ insurance policies cover renovations up to a maximum amount. If you want to be covered for unforeseen repairs or replacements, you’ll need to get an additional policy.
If you plan on making extensive renovations to your home or live in an area at risk for natural disasters, you may need to get a renovation insurance policy, too. That additional insurance will protect you from unexpected costs.
Getting sufficient coverage may also benefit you if you need to make a claim that includes the unexpected cost of building materials, such as the rise in the cost of lumber.
A 3-Point Checklist for Purchasing Insurance
Now that you understand the purpose of insurance and reviewed a few different types of insurance, here are some of the things you need to consider before buying a policy.
- Determine how much coverage you need.
Since the price of policies varies greatly, you will need to understand your current financial situation and the different types of insurance available. An agent could help you figure out just how much to buy.
- Before shopping for insurance, create your monthly budget.
Knowing your monthly income and expenses before speaking to an insurance company will help you make an informed decision about what you can afford.
- Understand the details of your policy.
Take the time to review the policy’s terms and conditions carefully. That will help you know the exclusions in your plan.
Also be aware of the coverage limits, deductible, and excess for your policy. If you don’t understand something, call the company or an insurance agent to have them explain it to you.
Remember, Insurance Is Complicated
Buying insurance is an important decision because you could be facing a huge financial burden if something happens. However, buying insurance can be hard. That isn’t because insurers are out to bamboozle the public with complicated jargon but because they need to be as detailed as possible to protect themselves from any possible liability.
Since insurance is complicated, it’s easy to be either underinsured or overinsured. So, before you buy any insurance, you must do two things: First, you must have a good idea of your monthly budget; and second, you should discuss the extent of your coverage with an insurance agent.