Insurance is considered to hold high value in our present society, but the benefits and helpful features of insurance are only realized ad valued once a loss has been incurred and policy holders are obligated to file a claim for compensation.
Three great features which make the concept of insurance appealing are risk pooling, risk sharing, risk transfer abilities, and loss prevention measures; all of which are displayed by the insurance products being sold today. Not only does insurance provide a guarantee of financial compensation to its policy holders, but it also a fundamental tool towards a well-functioning economy.
To avoid possible financial burden due to unwanted circumstances in the future, private individuals as well as businesses take out insurance policies. Instead of shouldering 100% of costs for hospitalization due to an accident, an insurance firm takes over and pays off these unwanted expenses instead. The out-of-pocket expenses are reduced substantially with an active insurance policy.
Another great benefit that an insurance product offers is that of peace of mind. In the case of an individual who takes out life insurance plan, the premium payments that are paid on a monthly basis serve the function of a money reserve which can then be used by the insured once retirement kicks in.
Financial stability delivered by insurance products also offer peace of mind to policy holders who are already retired or who are unable to work due to permanent damage or injury from an accident. With adequate insurance, a policy holder, though unemployed, can still generate income from his insurance product.
Keeping an insurance may also offer investment possibilities to policy holders. There insurance policies; such as those in life insurance, that premiums are invested to productive business endeavors and activities. Policy holders enjoy higher amount of return from an insurance policy that earns considerable amounts of interest overtime.
So How Exactly Does Insurance Function?
Simply put the concept of insurance can be explained using these two explanations:
• Insurance companies take the risk in place of their clients. Any item, product, quality, or commodity should be insured to guarantee financial compensation and replacement.
• The main feature of insurance is that of sharing risk across all policy holders. By reducing the rate of impact on individuals and eliminating the financial, mental, and emotional stress from unpleasant circumstances, all insurance policy owners share the same amount of responsibility towards achievement of peace of mind, security, and protection of everybody.
In this article, we will try to tackle the three most popular and top-selling insurance products in the country namely:
• Health insurance
• Home insurance
• Auto insurance
We will tackle their purposes, features, and the different types of policies under these three insurance categories.
• Health Insurance
Health care is undeniably expensive in the country, and there is no other way of securing your health and that of your financial stability than through the purchase of health care insurance. Basically, health insurance covers for the expensive medical costs that are caused by a plethora of medical conditions and illnesses. It covers not only for medical management and treatment, but also for procedures such as diagnostic exams, checkups, routine physical examinations, prescription drugs, and doctor’s consultation fees.
With a health insurance, individuals are more likely to place more importance on their health as the overall cost of seeking treatment is cheaper when compared alongside getting medical management without a life insurance policy that covers a large portion of these expenses. Another benefit of having a health insurance policy is that it delivers great relief and security to policy holders during emergency cases as well.
• Fees-for-Service Health Insurance Plan
This is the most common form of health insurance policy in the United States. Insurance firs most often pay the fees for the services that are provided to their active policy holders. The fees-for-service health insurance provides a wide array of choices in terms of medical professionals and institutions for patients to choose from. Policy owners will only need to pay a predetermined premium amount monthly to take advantage of the features found under this type of policy.
• HMO or Health Maintenance Organization
HMO is essentially a prepaid health insurance plan. Members are required to pay monthly premiums in exchange for comprehensive health care for you and other members of your family. A co-payment of up to $20 will need to be paid by the policy holder before the coverage from HMO kicks in.
• Point-of-Service Plans (POS)
This type of health insurance coverage combines features from the HMO model and that of POS plan. In this case primary care physicians that are under the POS network will normally make referrals to other specialists under the health plan, but policy owners have the freedom to choose in seeking medical specialists outside the network and still get coverage for the medical service rendered.
• Preferred Provider Organization (PPO)
PPO is a combination between traditional fees-for-service health plan and HMO. Just like an HMO, there are only a limited number of specialists under the network. Policy holders do not have to pick from the medical professional who are participants in the network as they can choose their own primary care provider instead. Health insurance policy holders will need to make both deductibles and coinsurance payments when seeking health care, regardless if it is preventive in nature or a formal medical management intervention. The out-of-pocket expenses are relatively higher due to lesser limitations under the PPO health insurance plan.
• Home Insurance
A house is undeniably one of the most valuable assets among majority of Americans. Due to the relevance of a home in our lives, it is only right to provide adequate protection to this structure and its contents by purchasing home insurance. With a home insurance in place, you do not have to worry about rebuilding from scratch in the event that your home was damaged from wild natural disasters or unwanted issues such as fire, theft, and burglary.
There are basically six types of home insurance policies that are being sold by insurance firms:
• Damage to House or Coverage A
This primarily offers adequate coverage in cases where the structure of the home encounters damage and needs repair. At the most, a policy holder will receive up to $100,000 financial compensation of the house was totaled.
• Other Structures or Coverage B
This will take care of the damage to other buildings or structures with a policy owner’s property or home’s surrounding such as detached garage, shed, and fencing.
• Personal Property or Coverage C
This coverage will take care of loss or damage to personal property. This coverage includes contents insurance as valuables found inside the building will be sufficiently covered in case of damage or total destruction due to external factors such as fire, broken pipes, theft, or natural calamity.
• Additional Living Expense or Coverage D
This will cover for the additional expenses incurred by the homeowner and the other inhabitants of the home. If the house cannot be occupied for a time being due to a loss or damage of property, the insurance firm will cover for the living expenses so the insured and the rest of the family may still experience normal standards of living.
• Comprehensive Personal Liability or Coverage E
This insurance coverage takes care primarily of personal liability. Coverage E serves the function of protecting a policy holder from accidents or injuries incurred by others inside his property. The Comprehensive Personal Liability is flexible in that it can be of benefit to the policyholder wherever he goes.
• Medical Expense or Coverage F
As the name implies, this covers for medical and health-care related expenses. There is a limited amount indicated per person and should be clearly stated in the policy. In addition the amount is also indicated according to the type of injury or accident incurred by others while within your personal property. Regardless if the policy holder is found to be legally liable for such accidents, this will still be paid off by the insurance firm.
• Auto Insurance
Obtaining an auto insurance is mandatory in majority of states and cities in the country. A car insurance policy is basically an agreement made between a car owner and an insurance firm, whereby the latter promises to provide financial compensation in case of losses, damage, accident, or injury suffered by the former. In this way, auto insurance policy owners are protected against legal liabilities and the major financial losses which usually come with accidents, injuries, and mishaps while driving an automobile.
Most states will require its motorists to take out minimum insurance liability in order to avoid penalties and suspension or revocation of license. However, it is only smart and sensible for policy holders to carefully assess their needs and purchase more auto insurance instead.
Here are the other types of auto insurance coverage that are being sold to consumers in recent years:
• Liability insurance
This primarily covers the expenses related to repairs and damage to property. Liability insurance is what most states mandate their citizens to purchase immediately after purchasing a car or applying for an auto loan. This coverage also takes care of medical bills that arise from such accident.
• Collision Insurance
Collision coverage will basically take care of the costs and expenses associated with repairing car damages. If the car is totaled, the insurance provider will replace the car with a new vehicle of equal value as well.
• Comprehensive Insurance
This type of coverage will cover just about anything untoward that may happen to your car. Theft, weather damage, and animal collision are some issues that comprehensive will take care of.
• Uninsured Motorist Protection
If the accident or mishap was caused by an uninsured third party, the uninsured motorist protection will take care of repair costs and medical expense for you!
• Personal Injury Protection
The medical expenses from a vehicular accident are undeniably expensive. To cover for such costs, you will need medical or personal injury protection. Although important this type of coverage is only optional among homeowners who already have health insurance policy under their names.
• No-Fault Insurance
Regardless of whose fault an accident was, the no-fault insurance will cover for injuries and property damages. This type of coverage is only available in 12 states and is still considered to be an optional choice among majority of car owners.
• Gap Insurance
If you are making payments on the car loan, the coverage provided by gap insurance is rather an excellent decision. This is especially formulated for car drivers who are still in debt with their cars and still need to pay off the car loan despite major accidents or even if the care was totaled from an unfortunate accident. This is the coverage that a vehicle owner should ideally take if he currently owes more than he could pay off immediately.
With all these sets of information regarding the three most crucial types of insurance products, we hope that you arrive at a smart and sensible decision as to which type of coverage policies match your requirements and personal preferences too!