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Frequently Asked Questions
Insurance policies are designed to protect you from significant financial loss in the event of an accident, illness or death. Insurance can cover cars, homes, lives, health and businesses. You pay the insurance company a monthly fee, or premium, and if the insured item becomes lost, stolen or damaged, the insurance company contributes a specific amount to the replacement or repair of the item. If you get sick, the insurance company contributes to your medical bills, and after your death, your beneficiaries collect the amount of your life insurance policy.
1. Common Types
- The most common types of insurance are automobile insurance, homeowners insurance, renter's insurance, life insurance and health insurance. If you own a car or a home that you are making payments on, your lender will require that you keep insurance on the home or car until you have paid off the loan. Also, most states require that you have a minimum amount of car insurance coverage.
2. Uncommon Types
- Many people insure other objects of value, such as fine jewelry, furs, artwork and antiques. Businesses insure the vehicles they use, and a farmer might insure his crops. Insurance companies will insure almost anything from a cell phone to a plane ticket if the owner is willing to pay the premium.
3. Deductible
- Payment for any type of insurance usually consists of two parts: the monthly payment, or premium, and the deductible. The deductible is the amount you pay toward any costs incurred before the insurance company pays anything. For example, if you have a $500 deductible on your home and you have $2,500 in damage after a storm, your insurance company would pay $2,000 toward the cost of repairs.
4. Filing a Claim
- If an item is lost, stolen or damaged, you must call the insurance company so forms can be processed and the incident can be documented. This process is known as filing a claim.
- Health insurance claims are usually handled at the place you receive the health care. For example, if you go to the emergency room, they will ask if you have insurance and then they will fill out the appropriate forms so your bill goes to your insurance company.
- After your death, the beneficiary of your life insurance policy must contact the life insurance company and provide a death certificate to the company, after which the proceeds of the life insurance will be paid to the beneficiary.
5. Warning
- Insurance may not cover the full value of the item. Find out if your insurance uses replacement value or depreciated value for losses. Replacement value means the insurance company will replace your product with a similar one no matter the cost on the present market, while depreciated value means the insurance company will assign a value to the product that's determined by its age and condition. For example, with cars, the insurance company may use the Kelly Blue Book value of your car, which may not be enough to purchase another car.
- Make sure you understand what your policy covers. There may be exclusions in your policy that limit when the insurance company has to pay. For example, the company may pay if the item is lost or stolen but not if it's damaged.