The concept of insurance is fairly simple — it involves paying someone (the insurance company) to take on a certain risk. When you buy an insurance policy, you agree to pay a premium (the cost of the insurance) to an insurer. The insurer, in turn, agrees to pay a specified amount of money in case something covered by your insurance is damaged, lost, or stolen. For example, those of us who own cars are required to carry automobile insurance. We pay the premiums, whether or not we have accidents. When we do have an accident, our insurer is responsible for paying the bills related to the accident, in whatever amount is specified in the insurance policy.
You can buy insurance to cover almost any risk — the risk that you will die, or that you will become ill and require medical attention, or that you will have a car accident, among others.
When you buy insurance, there are lots of things to think about — specific risks you are actually facing, where you are in your life, how much insurance coverage you can afford, and other factors. So before you get started making decisions about buying insurance, it’s helpful to know something about each of the types of insurance that are available to you.
There are several different categories of insurance:
Life Insurance
— provides an insurance benefit when the person who is insured diesHealth Insurance
— covers certain medical expenses and prescription medicationsProperty Insurance
— pays a benefit if your property is damagedLiability Insurance
— provides you with insurance protection if you are found to be at fault and cause damage to someone’s health or propertyDisability Insurance
— pays you income if you are unable to workLong-term Care Insurance
— covers some portion of in-home care and/or nursing home bills