Definition of Insurance Coverage

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When it comes to insurance, what you are simply doing is transferring the risk and you are paying the insurance company to take on that liability. Get a definition of insurance coverage with help from an expert at Combs & Company in this free video clip.

Part of the Video Series: Insurance Questions Answered
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Video Transcript

Hi, my name is Susan Combs, and today we're going to talk about the definition of insurance coverage. When it comes to insurance, what you are simply doing is transferring the risk and you are paying the insurance company to take on that liability. So when you purchase an insurance policy you are entering into a contract with the insurance carrier. So that if a claim comes in then they are going to pay it out on your behalf. So this can be taken a look at as your homeowner's insurance, say your home is valued at $500,000 and you are paying say $200 a month to transfer that risk so that if your home burns down that you are going to be made whole. Just like with health insurance, you know, say that you have a maximum out of pocket of $2,000 and you are paying a premium of $400 a month. You are paying that $400 so that if you you know, get sick, you go into the hospital, you go to doctor's visits, that you know that the most you are going to pay out of pocket is going to be $2,000 in additional to your premium. So the main thing to understand is to know your insurance contract whether we are talking about your homeowner's, your business or your health insurance or even your life insurance and know exactly what the implications are and what that contract states so that you know when you are transferring the risk what you are going to be eligible for getting back when you put in a claim.

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