What are Insurance Basics? Premium – Deductibles – Copay
Insurance has always been about protecting your interests and possessions against calamities, accidents, risks, or unforeseen events. By paying a monthly premium, you are storing funds with an insurance company to cover your financial needs in time of stress or a change in your normal routine.
There are different kinds of insurance and over the years insurance has become so specialized that it is possible to insure parts of the body, specific situations like flooding or weddings that did not push through, and even strange coverage like alien abduction and zombie attacks. Fortunately, most people stick to the mainstream insurance plans like Auto, Life, Medical, and Home insurance.
For all insurance types, there are similar basics such as:
Premium – This is the amount you pay every month to cover your insurance. There are some businesses that pay for part of the premium for their employees like health insurance.
Deductible – This is the amount you have to pay the insurance company after a claim has been approved for payment. For instance, your car is involved in an accident and would cost $500 to repair. You can file an insurance claim but will have to pay the agreed deductible written on the insurance policy before the insurance company pays for the repairs.
Copay – This is a flat rate that you are required to pay when you avail of coverage
Maximum – This is the final amount that an insurance company will pay. It is usually applied with a recurring expense like a medical condition
In almost all cases, insurance for auto is mandated by law. You can’t drive a car that isn’t insured. With the new Health Insurance Law in the United States which takes effect in 2014, Health Insurance will also be a requirement or a penalty tax will be levied on the non-paying individual. Related information here..
In most cases, a person is free to determine the amount of insurance he or she wants to purchase provided there are no loans or mortgages attached to the vehicle or property.