Insurance is all about protection from the unforeseen. Insurance products are designed to cover the risks we face daily. These insurance products depend on personal circumstances, needs, and preferences.
Common types of insurance
Health insurance
This is a type of insurance that helps you cover the cost of medical and surgical expenses, including doctor’s consultations, medical bills, prescription medications, and dental care. Health insurance can come in different forms and the most common being:
Health Maintenance Organisations (HMOs) specify the doctors and hospitals within their network that you should use. This is usually a low-cost plan.
Preferred Provider Organizations (PPOs) provide you with more flexibility to select your doctors and hospitals. The use of service providers outside the network may attract additional charges
Point-of-Service (POS) is a combination of Health Maintenance Organisations and Preferred Provider Organisations. You can use doctors and hospitals in the network without a referral.
Medical aid: covers members’ healthcare costs according to the rules of the medical aid scheme. The member’s medical aid plan defines the amount of contribution you make to the fund and the amount of benefit you receive.
Medicare or State-sponsored Plans: Medicare is a federal health insurance program in the United States of America for people over the age of 65 and people with certain disabilities. Different countries have different health insurance products for their citizenry.
Homeowners insurance
Homeowners’ insurance may not be required by law, but it is a noble idea. Homeowners insurance covers your home and its contents against damage or loss and also in case someone is injured on your property.
Homeowner’s insurance policies
Dwelling coverage: Covers the rebuilding costs for your home if damaged or destroyed.
Contents coverage: This covers the replacement costs of your belongings if they are damaged or stolen.
Liability coverage: covers the legal expenses if someone is injured on your property.
Auto insurance
Auto insurance is usually a requirement by law in most jurisdictions. It helps cover the cost of repairs or replacing your car if it is damaged in an accident.
Auto insurance policies cover the following aspects:
Third-party liability coverage: Covers the cost of damages you cause to other people’s property or injuries to other people.
Collision coverage: Covers the cost of repairs to your car if you are involved in an accident.
Comprehensive coverage: This covers the cost of repairs to your car if it is damaged by something other than a collision, such as theft or fire.
Uninsured/Underinsured motorist coverage: This covers the cost of your medical expenses and property damage if you are involved in an accident with an uninsured or underinsured driver.
You can make use of The Zebra to compare insurance products and costs.
Life insurance
In short, life insurance provides financial security for your dependants or beneficiaries if you die. There are many different types of life insurance products, each designed to protect against a different type of risk.
Common types of life insurance
Term life insurance: provides coverage for a specific period, for example, 15 or 25 years. The insurance is only paid out if the insured dies during the contract term. At the end of the term the insurance expires and no death benefit will be paid if the insured dies.
Permanent life insurance: provides coverage for the insured’s lifetime. Permanent life insurance builds cash value, which can be used for a variety of purposes, for example paying for retirement or college expenses.
Whole life insurance: A type of permanent life insurance that provides a guaranteed death benefit.
Universal life insurance: A type of permanent life insurance that gives the insured more flexibility in how the policy is structured. This includes how much of the premium goes toward the death benefit and how much goes toward cash value.
Variable life insurance: A type of permanent life insurance that allows the insured to determine the cash value to invest in various sub accounts.
Factors to consider when choosing insurance products
- Budget: Insurance can be expensive. It is important to find policies that fit the budget.
- Lifestyle: Your lifestyle will determine the type of insurance you need. For example, if you have a high-risk job, you may need to purchase disability insurance.
- Compare rates: Get quotations from multiple insurance companies to find the best rate. It may be necessary to use insurance brokers to get the best deal.
- Read the policy carefully: Before you sign any policy, be sure you have read and understood the fine print.
Conclusion
Insurance is an integral part of personal finance. Therefore, you must first protect your income through life insurance then your health through health insurance, and lastly assets through auto and homeowners insurance.
