The Basics of Insurance

The Basics of Insurance

Definition

In a simple meaning, insurance is a way to protect yourself or your assets from financial lost. It’s a contract between two parties where one party would pay for the loss of the other party caused by certain events agreed within the contract.

How Insurance Works

The main principal of insurance is sharing losses. So if you want to be covered for your loss, you must agree to make regular payments, which are called premiums to the insurance company. The company will then give you a policy stating that they will cover with conditions as agreed in the policy.

Types of Insurance

There are so many types of insurance, including some insurance bought to cover unusual “assets” like legs, breasts, nose, or lips that usually sold to celebrities. However, in general there are three kinds of insurance; Life insurance, Private health insurance, and Property & Liability insurance.

1. Life Insurance

Life insurance guarantees that the insurance company will pay certain amount of money if the insured person dies. The payment can be done in a lump sum or with installments to the people named by the policyholder as the beneficiary. There are many different types of life insurance, including the one that also works like a savings account, so the policyholder can actually save money. This type of life insurance policy has a cash value and if needed, the policyholder can borrow money or exchange the policy for cash.

2. Private Health Insurance

This is the type of insurance that will cover all or part of the medical care cost. Lately it has become quite popular as the cost of medical care keeps rising. Without health insurance a person can easily suffer a terrible financial hardship, especially when a serious illness that requires a long and expensive medication occurs.

3. Property and Liability Insurance

This type of insurance is purchased by businesses and individuals to protect their assets from financial loss. Property insurance will cover financial loss of policyholders in case their assets are lost or damaged. While liability insurance will cover the financial loss of policyholders against third party liability.

Financial Stability of Insurance Company

People buy insurance to manage risks related to financial losses. Insurance companies as the party who responsible for these losses in the end should have a good financial stability. That’s why it’s important to choose a good insurance company before you decide to buy insurance policy, to make sure all you are secured from any possible financial losses in the future.

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How To Save On Teen Auto Insurance Policies

Teens with good grades may qualify for a good student discount. There are a number of insurers that offer premium discounts for any student driver that has an A or B grade point average at school. You might consider shopping around if your current insurer doesn’t offer such a discount. Another discount commonly offered by insurance companies is for students that have taken an accredited driver’s education course. Certain insurance companies offer unique safe driving program discounts. For example, State Farm offers a 15% discount for teen drivers that go without traffic violations or accidents.

Safe driving is actually one of the easiest and most controllable ways to keep teen auto insurance premiums down. Teen drivers should practice safe driving anytime they are behind the wheel, which means driving the speed limit to avoid speeding tickets and driving cautiously to avoid auto accidents. It’s also important to keep in mind that the driving indiscretions of new teen drivers will be a cost that will follow them for years to come, as most auto insurance companies look at the last three to four years of the driver’s driving record when setting premium rates for the driver.

Another discount can be found if the parent of a teen driver has multiple insurance needs that they are willing to meet through one company. A good number of insurance companies offer discounts to customers that exclusively use them to insure all their vehicles and/or for other insurance policies like homeowner’s insurance. Teens that will be paying for their own policy can ask their parents to find out if their existing policy would provide coverage and offer to pay their parents the cost difference. There are also niche insurance companies that specialize in teen auto insurance policies if premiums would raise significantly for the parent.

The make, model, and safety features of the car driven by the teen can impact premium rates. Features like anti-theft devices, antilock brakes, and safety bags can slightly lower the premiums. On the other hand, hot-rod and flashy cars that insurers view as driving hazards can significantly raise premiums.

Choosing liability coverage only or your state’s minimum required amount of insurance can help lower premium costs if a teen will be driving a vehicle of little value or that doesn’t have a lien.

In closing, nobody said being a teen driver is easy or cheap, but there are quite a few easy ways to save on teen auto insurance.

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