We all dread being stuck in a corner at a party, trapped by an eager young insurance agent with sales on his or her mind. Hours, or even minutes, spent speaking about insurance with an insurance agent when you’re not in the market for more insurance could be considered a form of torture which might work better than water-boarding.
But seriously, all of us need insurance coverage. Why, you ask? It’s because unpredictable accidents, illnesses, injuries, and sometimes even “acts of God” like floods, fires, and hurricanes, happen to all of us from time to time. Rare is the person who lives a charmed life free of all losses.
Insurance, at its best, is designed to specifically cover those losses which would be catastrophic to the uninsured individual, and thus to provide peace of mind to the fully insured person. A serious car wreck with injuries or even deaths is just one example of a catastrophic loss. In such a dire situation, your highly rated, good insurance company stands between you and potential financial ruin. In case you are brought to trial, your insurance company will usually provide you with a team of lawyers to help you. If you were found to be at fault in the accident, the insurance company lawyers will attempt to limit the fines or other monetary damages you will be required to pay. They may perhaps even keep you out of jail. Now don’t you feel inspired to pay that premium every month?
Yes, there is an insurance premium to be paid once a month, every six months, or maybe once a year. You of course risk an overall loss of money if you never file a claim. That premium can be expensive, too, especially if you’re a teenage boy, drive a sleek little sports car, or have DUI’s or speeding tickets on your record. You are considered to be a poor risk. However, good drivers can receive discounts and reasonable insurance rates for their squeaky clean records and good credit ratings.
Speaking of credit ratings, when shopping for insurance quotes on the Internet you may discover that insurance companies set their rates in part based on your credit score. When you near the end of your login to just ask for a quote, you may be asked for your Social Security Number and/or you may see some rather small print advising you that your credit will be checked. Please, shop around before providing this information to every inquiry. Too many inquiries can drive your credit score down, and besides that, you may not want to release such personal information to every “Tom, Dick, and Harry” insurance agent on the Web.
Choosing the insurance coverage you need may require some homework on your part. Keep in mind that there is no such thing as “full” coverage. Each type of coverage you purchase has a limit on how much it will pay. Choosing a higher coverage limit with lower deductibles costs more now, but will likely save you some money in the short run if you have to file a claim soon. However, financial advisors suggest that in order to save money over the long term you should select the highest deductible you can reasonably afford to pay out of pocket on short notice. Only you, in discussions with your spouse (if any) and your financial advisor, can decide what this figure might be.
Finally, the most compelling reason of all to adequately insure yourself is that, at least for some types of insurance, it’s the law of the land. For example, automobile insurance liability coverage is, in a word, a must! This type of coverage pays the medical bills and possibly some additional pain and suffering compensation for bodily injury to others you may have harmed, and property damage to their vehicles or other damaged items, in the event of a serious accident. In a routine traffic stop the police may ask you to show proof of this insurance, and if you cannot, you will be summarily fined. If you still owe money on your car, you will also be required to carry collision insurance which will replace or repair the vehicle after a usually surprisingly expensive fender bender or something worse.
Lastly, by law, if your home is mortgaged, you must carry a certain amount of homeowner’s insurance. This insurance pays to rebuild your home after a fire or other disaster. The amount of insurance you must carry varies by the state in which you reside. Of course, this form of insurance protects both you and the lending institution who is carrying your mortgage. For most folks, their home represents their largest single investment, so it must be protected with a current evaluation of the value of the home. A caution: with insurance policies written several years ago, you may believe you are adequately covered when in fact you’re not. Outdated policies often fail to keep up with inflation in building costs, so the policy should be reviewed every few years. As we have seen, talking with that eager young insurance agent at the party isn’t such a bad idea after all.
