When you start talking about insurance, you might be surprised at just how many people have no idea what it actually is. Insurance is more than just a way of protection against financial loss; it’s also a great type of risk management, mainly utilized to mitigate the risk of some unpredictable or contingent event. There are lots of misconceptions about insurance, but the purpose of this article is to clear up some of them and help you understand the basics of this interesting but complex investment tool. Here are some examples:
It is an investment! This is a common misconception, because the purpose of insurance coverage is to protect against the possibility of some sort of loss, most of the time, from something that can’t always be controlled like fire or weather damage. Some policies may provide coverage for damages due to a car accident, for example, while others may extend coverage for your home and other belongings if you are harmed in a flood or other natural disaster. It’s also a good idea to find out what sort of benefits are included in a policy, as this may influence your decision on whether or not to purchase one.
I don’t need it! Property damage and liability insurance are the most common types of insurance, although there are several others which may be appropriate for your situation. In general, however, you should get coverage for any potential losses that you may incur, which may include theft or damage due to vandalism, smoke damage, water damage, vandalism or malicious mischief, explosions, and a few other events. Premiums for these policies will depend on the seriousness of the threat, so it’s best to determine how much coverage you think you will need before shopping around. You can get more information about Event Cancellation Insurance
It only covers losses after the policy has expired! Most insurance policies provide coverage up until the actual cash value, which is the amount that a policy may settle for at the end of the policy period. Some policies may require additional coverage, including loss of or damage to rental cars, personal property, and possibly loss of income. Check your policy documents to learn what additional coverage may be required, and how it may affect your actual cash value at the end of the coverage period.
Premiums are large amounts of money paid out to the insured. In most cases they are based on an insurance company’s estimate of the risk that a particular business or item poses, and on the probability that a claim will be paid out. Insurance premiums, like most other things, tend to be affected by many factors, including the economy and the health of the insurance industry. If you expect to have large numbers of claims throughout the course of your business’s operation, or anticipate that the insurance industry will experience large numbers of bankruptcies over the next few years, it’s a good idea to purchase a larger policy.
Life insurance isn’t usually a consideration for a self-employed person, as most self-employed individuals already have some form of health coverage. Health insurance is usually purchased for the benefit of the family of the insured, or on a term basis for a specific period of time. This is generally the only type of coverage that an individual will need until they reach retirement age.