Why Do People Need Insurance?
There are many reasons why a person may choose a specific insurance policy. They may want to protect themselves in case they get injured, become sick or even die. Someone may buy insurance to cover their possessions. Company owners may want to protect themselves, employees and property while conducting business. No matter what the circumstances are, having insurance to protect what matters most to you can make life much easier, and less expensive.
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Types
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Insurance is a contract in which one party agrees to compensate another party for any losses or damages caused by risks identified in the contract. This is in exchange for a lump-sum payment or periodic amounts of money to the first party. There are several insurance policies that are designed to protect your valuable attributes. These include health insurance policies, including vision and dental, life and disability. Someone can buy coverage to protect their personal property. This includes material items of homeowners and renters. Insurance can also cover autos, boats, motorcycles, and valuables such as jewelry, paintings and other house furnishings. Businesses pick up insurance plans for the benefit of their employees like group health, life and disability. They also protect themselves by purchasing commercial liability and indemnity coverage when their employers or clients get injured or sick, or cause property damage. It also covers errors or omissions, negligence and breach of duty on behalf of the company. Damages and injuries caused by floods, earthquakes and other natural disasters also can be insured. The government sponsors several insurance plans specifically for the good of the public. These include health, workers' compensation, unemployment, Social Security and disability.
Pros
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Having insurance gives the policy owner peace of mind. It helps to know that they are protected if something happens to them or to their property. Being insured means you don't have to pay for all the damages yourself. Some policies provide income if you are laid off or are injured. You and your family can be treated for illnesses and medical conditions without worrying about a huge medical bill. Insurance companies who insure liability policies work with the policyholder by conducting investigations and paying legal fees in order to protect you and them from paying frivolous claims.
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Cons
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Insurance can be very expensive. Health insurance, for example, is a necessary policy to have in case of sickness and injury. However, 46 million Americans were without insurance in 2007. This is attributed to high premiums, which have risen 119% since 1999. Some policies may be hard to get if your situation poses a high risk to the insurance company. For example, a person who works in an office might have to pay higher premiums or be denied altogether. This is not necessarily due to job risk, but because of the high number of claims submitted to the insurance company. Construction workers, however, have a more risky occupation. Still, they may receive more favorable rates if they pose a low claim history. Not everyone can be covered by a policy that they apply for due to restrictions or high risk. Pre-existing conditions, age, excessive or insufficient financial income levels and short employment history may keep a person from being issued a particular policy.
Misconceptions
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For the exception of certain policies, like life and accidental death insurance, that pay you a lump sum, most other policies bring you back to the level you were at before the incident. Others intentionally do not pay or cover everything you claim. Policies such as disability and unemployment will only pay a percentage of what you earned before being unable to work. Most types of health insurance will pay all or at least a portion of your health services. This is because if someone could function financially the same way after an incident while receiving benefits, there would be no incentive for them to get well enough to go back to work.
Warning
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Being caught without insurance can lead to severe consequences. Most liability coverage protects the policy owner from paying court costs and huge amounts from lawsuits. Lawsuits can lead to an award of millions of dollars to an offended party. You may also have to pay out of pocket for repairs to building and surrounding structures, cars and other property damage. Most importantly, not having insurance policies such as auto, commercial liability and professional indemnity can be against the law in your state. The insurance costs come in addition to paying any lawsuits and damages that you might be responsible for.
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