Insurance Basics

Reviewed Jun 8, 2017

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Summary

You should purchase insurance from the company that offers a quality product and service for the lowest cost, and consider factors such as the financial standing of the firm.

Whether you need an auto policy or an umbrella liability policy, insurance rules, and terminology can seem daunting. Carefully weigh your options and be sure you understand what you’re buying.

Selecting an insurance carrier

Many different types of insurers exist, including stock insurers, mutual insurers, reciprocal insurers, Blue Cross/Blue Shield insurers and health maintenance organizations (HMO). You should purchase insurance from the company that offers a quality product and service for the lowest cost, and consider factors such as the financial standing of the firm. Rating agencies such as Standard & Poor’s evaluate the stability of insurance companies.

Applying for insurance

An insurance agent can help you make a choice and complete the application process, although companies may sell life insurance and property-casualty policies without using agents.

When you apply for an insurance policy, you answer basic demographic questions such as your age and sex. Other questions involve more specific information. If you apply for an auto policy, for example, the agent might ask you what type of car you want to insure and what kind of driving record you have. The “underwriting” process helps companies assess the risk of insuring you.

Major types of insurance

Health insurance

Private health insurance includes two broad categories: traditional and managed care. Traditional plans often are called fee-for-service plans. Managed care plans include preferred provider organizations (PPO), point-of-service plans (POS), and HMOs.

Depending on the plan, you may have complete autonomy in choosing a health care provider, or you may have to choose from among a selected network of providers. Out-of-pocket costs vary.

There also are public health insurance programs such as Medicaid or Medicare, which have certain eligibility requirements.

Auto insurance

Auto policies offer six different types of coverage, each priced separately. A policyholder may purchase all of the coverages or some of them. They include bodily injury liability, medical payments or personal injury protection, property damage liability, collision, comprehensive, and uninsured motorist coverage.

Homeowner’s insurance

This covers your home, personal possessions and personal liability. Several types of policies offer different amounts of coverage for losses caused by various perils, such as fire or theft. Often, lenders include homeowner’s insurance as a mortgage requirement.

Life insurance

You may need life insurance if anyone depends on your income. These policies can cover funeral expenses, debts and care of children or elderly parents, for example. A typical rule of thumb suggests purchasing insurance equal to five to eight times your annual earnings.

Long-term care insurance

This can help pay for care in a nursing home, assisted living facility, or at home. These policies include certain qualifications that must be met before benefits begin, such as the inability to perform several daily living activities.

Disability insurance

This replaces income lost because of illness or injury. A general rule of thumb recommends having disability insurance that could replace 60 percent to 70 percent of your taxable earnings. Disability insurance may cover short- or long-term periods and comes in several forms, including employer-provided benefits, Social Security and private policies, among others. When calculating how much disability insurance you may need to purchase, consider all other benefits you may qualify for.

You can purchase other types of insurance depending on your needs and preferences. For example, a personal umbrella liability policy can provide liability protection beyond your homeowner’s insurance or automobile insurance. Your lawyer, accountant, or tax advisor can give you specific advice.

Resources

America’s Health Insurance Plans
www.ahip.org

Insurance Information Institute
www.iii.org 

By Kristen Knight

Summary

You should purchase insurance from the company that offers a quality product and service for the lowest cost, and consider factors such as the financial standing of the firm.

Whether you need an auto policy or an umbrella liability policy, insurance rules, and terminology can seem daunting. Carefully weigh your options and be sure you understand what you’re buying.

Selecting an insurance carrier

Many different types of insurers exist, including stock insurers, mutual insurers, reciprocal insurers, Blue Cross/Blue Shield insurers and health maintenance organizations (HMO). You should purchase insurance from the company that offers a quality product and service for the lowest cost, and consider factors such as the financial standing of the firm. Rating agencies such as Standard & Poor’s evaluate the stability of insurance companies.

Applying for insurance

An insurance agent can help you make a choice and complete the application process, although companies may sell life insurance and property-casualty policies without using agents.

When you apply for an insurance policy, you answer basic demographic questions such as your age and sex. Other questions involve more specific information. If you apply for an auto policy, for example, the agent might ask you what type of car you want to insure and what kind of driving record you have. The “underwriting” process helps companies assess the risk of insuring you.

Major types of insurance

Health insurance

Private health insurance includes two broad categories: traditional and managed care. Traditional plans often are called fee-for-service plans. Managed care plans include preferred provider organizations (PPO), point-of-service plans (POS), and HMOs.

Depending on the plan, you may have complete autonomy in choosing a health care provider, or you may have to choose from among a selected network of providers. Out-of-pocket costs vary.

There also are public health insurance programs such as Medicaid or Medicare, which have certain eligibility requirements.

Auto insurance

Auto policies offer six different types of coverage, each priced separately. A policyholder may purchase all of the coverages or some of them. They include bodily injury liability, medical payments or personal injury protection, property damage liability, collision, comprehensive, and uninsured motorist coverage.

Homeowner’s insurance

This covers your home, personal possessions and personal liability. Several types of policies offer different amounts of coverage for losses caused by various perils, such as fire or theft. Often, lenders include homeowner’s insurance as a mortgage requirement.

Life insurance

You may need life insurance if anyone depends on your income. These policies can cover funeral expenses, debts and care of children or elderly parents, for example. A typical rule of thumb suggests purchasing insurance equal to five to eight times your annual earnings.

Long-term care insurance

This can help pay for care in a nursing home, assisted living facility, or at home. These policies include certain qualifications that must be met before benefits begin, such as the inability to perform several daily living activities.

Disability insurance

This replaces income lost because of illness or injury. A general rule of thumb recommends having disability insurance that could replace 60 percent to 70 percent of your taxable earnings. Disability insurance may cover short- or long-term periods and comes in several forms, including employer-provided benefits, Social Security and private policies, among others. When calculating how much disability insurance you may need to purchase, consider all other benefits you may qualify for.

You can purchase other types of insurance depending on your needs and preferences. For example, a personal umbrella liability policy can provide liability protection beyond your homeowner’s insurance or automobile insurance. Your lawyer, accountant, or tax advisor can give you specific advice.

Resources

America’s Health Insurance Plans
www.ahip.org

Insurance Information Institute
www.iii.org 

By Kristen Knight

Summary

You should purchase insurance from the company that offers a quality product and service for the lowest cost, and consider factors such as the financial standing of the firm.

Whether you need an auto policy or an umbrella liability policy, insurance rules, and terminology can seem daunting. Carefully weigh your options and be sure you understand what you’re buying.

Selecting an insurance carrier

Many different types of insurers exist, including stock insurers, mutual insurers, reciprocal insurers, Blue Cross/Blue Shield insurers and health maintenance organizations (HMO). You should purchase insurance from the company that offers a quality product and service for the lowest cost, and consider factors such as the financial standing of the firm. Rating agencies such as Standard & Poor’s evaluate the stability of insurance companies.

Applying for insurance

An insurance agent can help you make a choice and complete the application process, although companies may sell life insurance and property-casualty policies without using agents.

When you apply for an insurance policy, you answer basic demographic questions such as your age and sex. Other questions involve more specific information. If you apply for an auto policy, for example, the agent might ask you what type of car you want to insure and what kind of driving record you have. The “underwriting” process helps companies assess the risk of insuring you.

Major types of insurance

Health insurance

Private health insurance includes two broad categories: traditional and managed care. Traditional plans often are called fee-for-service plans. Managed care plans include preferred provider organizations (PPO), point-of-service plans (POS), and HMOs.

Depending on the plan, you may have complete autonomy in choosing a health care provider, or you may have to choose from among a selected network of providers. Out-of-pocket costs vary.

There also are public health insurance programs such as Medicaid or Medicare, which have certain eligibility requirements.

Auto insurance

Auto policies offer six different types of coverage, each priced separately. A policyholder may purchase all of the coverages or some of them. They include bodily injury liability, medical payments or personal injury protection, property damage liability, collision, comprehensive, and uninsured motorist coverage.

Homeowner’s insurance

This covers your home, personal possessions and personal liability. Several types of policies offer different amounts of coverage for losses caused by various perils, such as fire or theft. Often, lenders include homeowner’s insurance as a mortgage requirement.

Life insurance

You may need life insurance if anyone depends on your income. These policies can cover funeral expenses, debts and care of children or elderly parents, for example. A typical rule of thumb suggests purchasing insurance equal to five to eight times your annual earnings.

Long-term care insurance

This can help pay for care in a nursing home, assisted living facility, or at home. These policies include certain qualifications that must be met before benefits begin, such as the inability to perform several daily living activities.

Disability insurance

This replaces income lost because of illness or injury. A general rule of thumb recommends having disability insurance that could replace 60 percent to 70 percent of your taxable earnings. Disability insurance may cover short- or long-term periods and comes in several forms, including employer-provided benefits, Social Security and private policies, among others. When calculating how much disability insurance you may need to purchase, consider all other benefits you may qualify for.

You can purchase other types of insurance depending on your needs and preferences. For example, a personal umbrella liability policy can provide liability protection beyond your homeowner’s insurance or automobile insurance. Your lawyer, accountant, or tax advisor can give you specific advice.

Resources

America’s Health Insurance Plans
www.ahip.org

Insurance Information Institute
www.iii.org 

By Kristen Knight

The information provided on the Achieve Solutions site, including, but not limited to, articles, quizzes, and other general information, is for informational purposes only and should not be treated as medical, health care, psychiatric, psychological or behavioral health care advice. Nothing contained on the Achieve Solutions site is intended to be used for medical diagnosis or treatment or as a substitute for consultation with a qualified health care professional. Please direct questions regarding the operation of the Achieve Solutions site to Web Feedback. If you have concerns about your health, please contact your health care provider.  ©2017 Beacon Health Options, Inc.

 

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