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Introduction to Insurance Policies, Premiums and Claims

By: , dated January 25th, 2013

Insurance is a financial topic of paramount importance for every individual. Insurance is designed to protect the financial well-being of you and your dependents in the case of unexpected loss. Some forms of insurance are required by law, while others are optional. Agreeing to the terms of an insurance policy creates a contract between you and the insurance company. In exchange for payments from you (called premiums), the insurance company agrees to pay you a sum of money upon the occurrence of a specific event. That event may be as mundane as a visit to the doctor or as serious as a car crash, depending on the type of insurance.

After contacting an insurance company about entering into a policy, you will receive a quote, which is the total amount of money you will need to pay over the term of the insurance policy in exchange for coverage. When you have agreed to pay this amount and the insurance company has agreed to insure you, you will receive a copy of the policy detailing the terms and conditions of your policy.

If an insured incident occurs, you will make a claim for payment from the insurance company. You will receive the amount you are insured for in the case of the specific incident minus a deductible that you must pay for each claim. Higher deductibles are associated with lower premiums and vice versa. Therefore, for claims that are likely to be made, it may be in your best interest to pay a higher premium in exchange for a lower deductible.

Given the importance of insurance, it is essential to make sure that your coverage is sufficient. However, paying for too much insurance or insurance that you don’t need can be a significant drain on your finances. Investigate all potential insurance policies carefully in terms of your own needs at the time of purchase and throughout the term of the policy.

Purchasing Insurance:

Insurance was traditionally sold by agents who worked for insurers and had a vested interest in selling you their specific policies. Now, there are more consumer-friendly options for acquiring insurance coverage. Independent agents can sell policies from several different companies, allowing them to be more objective about your personal needs. These individuals may even be able to provide a complete review of your insurance needs, something you should do on a regular basis to keep your policies up to date with your current financial situation. The web has also become an excellent resource for shopping for and even purchasing insurance.

It is important to research any company that you are considering to identify the quality providers. When choosing an insurance company, it is important to find one with a good independent rating from Standard & Poor’s or another leading rating service. This will tell you whether the company is likely to be able to pay off claims even in the event of a disaster that leads to an abundance of payouts. Recommendations from individuals and consumer information publication in print and on the web may be able to provide additional information related to the quality of service. These considerations may include likelihood of a claim being paid, speed of payout, customer service and other services available from the company.

Purchasing more than one policy from a single insurer can save you money in the form of discounts. Therefore, it may be in your best interest to single out companies that will provide quality coverage in all of the areas that you are interested in, instead of piecing together your coverage from many different insurers.

This article was brought to you by the InvestorGuide Staff Writers and Editors.

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