Cash Course: Insurance Basics

in 1666 England experienced The Great Fire of London this tragedy devastated most of the city and during the rebuilding a man named Nicholas barbin formed the first insurance company to deal with the risk of property fire we still use his framework for insurance today life is full of risks so accidents can and will happen and when car crashes medical emergencies sick pets busted pipes floods and fires happen they can cost an arm and a leg for a fee or premium insurance coverage can be purchased from a company who will then assume some of the Financial Risk when disaster strikes you make a claim to the insurance company and they should help soften some of the blow to your wallet here's how it works lots of people pay premiums to purchase insurance policies all of this money is pooled together by insurance companies who then use it to pay a percentage of other policyholders losses as accidents occur because the amount of money pooled together should exceed the amount of money paid out insurance companies don't run out of funds and are prepared to cover some of your losses if something happens to you insurance is all about taking each person's individual risk and spreading It Out Among the large pool of Premium payers imagine suddenly having to pay the entire cost to repair your car from a serious accident I'm the safest driver there is Sven I'm sure you are but that doesn't mean everybody else is and you're all on that road together accidents and emergencies can catch us by surprise but when they do it's a relief to know you have some insurance Let's Pretend someone hits you in a car accident it can cost thousands of dollars to repair both cars and pay for the medical expenses that everyone involved I'll make them pay you could but do you think they would have all that money in the bank probably not now you don't have a car and your medical bills are piling up that's where Insurance could help to cover some of your financial loss some of my loss why not all of it because policyholders that's you have to pay a certain amount of money on their own before Insurance kicks in and begin covering any losses this amount is called a deductible typically policies with higher premiums have lower deductibles and policies with lower premiums have higher deductibles picking a specific policy depends on your risk let's use health insurance as an example healthy individuals who rarely go to the doctor May opt for low monthly premium moderate coverage High deductible plants While others who get sick are hurt more often or who have medical conditions may choose to pay higher monthly premiums in order to have more coverage and lower deductibles generally the higher the risk of whatever is being insured the higher the cost if you live in an urban area with heavy traffic your car insurance premium will most likely be higher that is just not fair well remember when it comes to insurance it's all about risk and the risk of having an accident in the busy city is higher than say if you lived in the suburbs with less traffic policyholders could also face higher premium costs if they file multiple claims insurance companies share claim history so it could even lead to difficulties finding a new or cheaper policy if the risk to assure you is determined to be too high you may even be refused coverage but the only exception being health insurance to get started first determine what you need to ensure depending on your lifestyle some types of insurance may be more necessary than others oh hair insurance just in case fun gives me a bad cut actually ensuring hair is a real thing but not something most people do the more common insurances are for health home renters and auto other types include Dental life and disability more unique policies like travel flood wind and earthquake exist but aren't purchased as often once you know what you need to ensure shop around the market is competitive and insurance companies want your money compare rates coverage deductibles and out-of-pocket maximums completely and carefully read policies the language can be tricky and things you may think are covered may not be be mindful of your budget When selecting a premium and a deductible have money saved to cover your deductible in case you ever need to file a claim this way you can opt for a higher deductible that's the part you pay before your insurance kicks in and you'll get the most bang for your buck lastly if you ever do need to make a claim on your insurance document the damage with photos or any other proof of loss and immediately contact your insurance provider maintain good records and keep your paperwork organized you may need to refer back to it at a later date success in life involves taking risks whether it be driving working or playing sooner or later you'll face an accident or emergency having some insurance can help you navigate those unexpected expenses so that even if your property gets wrecked your finances won't what do you mean 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