What Is Insurance?
Insurance is a consumer protection product that is designed to provide financial benefits in the event of an accident, natural disaster or medical need. When you purchase an insurance policy, you pay money (a premium), usually on a monthly, quarterly or annual basis, and in return receive peace of mind. That is to say, if an accident occurs, your insurance policy (depending on what kind of policy you have) pays some or all of the financial burden the accident causes.
There are many different kinds of insurance such as: life insurance, auto insurance, homeowners insurance, rental insurance and others. There are also many different types of insurance policies for each kind of insurance. Sometimes you are required to purchase insurance. For example, if you have a home mortgage, you are usually required by the mortgage lender to purchase homeowners insurance.
Insurance is an important and often necessary investment that financially protects you and your loved ones.
Before you buy insurance, no matter what kind, it is important to do the following:
- Find out whether your state insurance department offers any information concerning insurance companies and rates
- Check several sources for the best deal
- Make sure the insurance company is licensed and covered by the state's guaranty fund
- Check the financial stability and soundness of the insurance company
- Research the complaint record of the company
- Find out what others think about the company's customer service
- Once you pay your first insurance premium, make sure you receive a written policy