Insurance is a type of risk management that is designed to protect the policyholder or the beneficiaries from financial loss. As long as you pay premiums and adhere to the contract requirements, you are guaranteed reimbursement. There are different types of insurance plans and in some states, it’s illegal if you lack certain types of insurances.
The four main types of insurance include Life Insurance, Healthcare Insurance, Auto Insurance, and Homeownerâ€™s Insurance. We know that a lot of people have numerous questions regarding these policies and to help you understand how they work, here is an overview of Life Insurance FAQ, Health Insurance FAQ, Auto Insurance FAQ, and Home Owner FAQ.
1. Life Insurance FAQ
Q: What is Life Insurance?
A: Life Insurance is an agreement between a person and the insurance company, where the insurer agrees through a contract to pay a designated beneficiary a lump sum amount of money the policyholder passes. This is flexible insurance coverage that guarantees your loved ones financial security when you are no longer around.
Q: What Are The Main Types of Life Insurance?
A: There are two main types of life insurance:
i. Term Life Insurance
Itâ€™s only effective for a specified period and it has a face value i.e. the amount you specify when you buy the policy. In case you die within the specified period then the insurance company will hand over your policyâ€™s face value to the beneficiaries. On the other hand, if that period elapses and you are still alive, you wonâ€™t be eligible for compensation unless you renew the contract.
ii. Permanent Life Insurance
It features various sub-categories such as variable, universal, and whole life insurances. This term of insurance doesnâ€™t have a specified time. Its valid your whole life as long as you make the premium payments. This type of insurance comes with a financial value because it has an accumulating cash benefit.
Q: When Should I Get Life Insurance?
A: Perhaps you are thinking that you should get life insurance when you are a bit older, right? Well, as soon as you make sense of its importance. That means that the best time to get life insurance is now. You should understand that the more you wait to buy life insurance, the more expensive it will become.
Q: Can I Increase My Life Insurance?
A: Yes, you can actually increase your life insurance. Life changes i.e. you might get married, have kids, get in debt, etc. Thatâ€™s why once you sign up for insurance, you must evaluate and update it from time to time. Some of the instances where you can change your coverage include:
- When you start a new business
- When you start a family or get married
- If you accumulate a personal debt
- When you buy a house
Generally, life insurance can highlight how solid your financial decisions are. Signing up for this coverage can be the best decision you will ever make because when you pass away, the accumulation will be given to your family or other beneficiaries.
Q: How Can I Buy the Best Life Insurance Policy?
A: You should be prepared to do extensive research. Although you should sign up for life insurance as soon as you can, you canâ€™t make the decision overnight. Go through multiple insurance companies and check some of the life policies they have.
Make sure that the policy you choose should make sense to you. Understand the rating systems as well as the total premium charges you will incur. Overall, make sure that the company you choose is legitimate and itâ€™s solid financially. If you are not sure, check if it has been rated by an independent insurance rating body.
Q: What Would Be the Appropriate Cost for my Life Insurance?
A: Insurance companies usually tailor the costs depending on the type as well as the needs of the policyholder. Besides that, your finances are also important because the company will only give you a policy that you can afford. But we can still help you make some estimates by these examples.
If you are alone then you should just choose a cover that caters to end of life expenses. This might cost around $10,000 to $20,000 for a short-term policy. If you have a big family and you are the main financial provider, then you should seek a larger life insurance policy. But the amount varies depending on the family. You can get a policy coverage of $500,000. On the other hand, there are those who can spend up to $1 million.
Note: when choosing insurance coverage and you have a large family, consider their needs in the coming years.
Sometimes you might want to use your life insurance as an investment. This means that you must choose a policy whose value accrues with time. Eventually, you can use the accumulated cash for retirement.
2. Health Insurance FAQ
Q: What is Health Insurance?
A: With health insurance, you are fully protected from costly regular healthcare expenses. These expenses normally include medical costs as well as surgical procedures. Once you sign the contract, you have to start paying premiums.
While you can buy health insurance privately, you can also get it from your employers. In addition to that, there are insurance options for certain groups of professional associations. So, if you belong to a certain association, this can come in handy.
Q: Is Health Insurance Required Legally?
A: Well, you will not be breaking any rule if you donâ€™t have a healthcare plan. But if donâ€™t carry coverage, then you might face tax penalties. Generally, itâ€™s important to get insured because you donâ€™t know when you will fall sick and the expenses you will incur.
There have been several motions regarding healthcare reforms in America. Generally, the cost of healthcare is very expensive and thatâ€™s where the Affordable Care Act was created to ensure that as many as possible.
Q: What Does Health Insurance Cover?
A: It all depends on the type of insurance as well as the company. Generally, health insurance can cover minor and regular checkups, family care, and major expenses involving surgery and medicine. Thatâ€™s why itâ€™s important to do extensive research before you buy health insurance. You need a service plan that will effectively cater to your needs.
When choosing basic insurance, donâ€™t get too carried away so that you end up forgetting the most basic stuff. You might even think that MRI scans are covered under the standard plan but this may not be so. However, under the Affordable Care Act, most routine services under preventive care are fully covered.
Sit down with the insurer, let them walk you through the service plans they offer. There are companies that cover even vision, dental, and surgeries. However, there are those that have simply restricted themselves to the most basic procedures. All in all, your insurance wonâ€™t cover all your medical costs. So, there are things such as deductibles, coinsurance, and co-pay that you should be aware of.
Q: What Are Some Of the Charges that I Need to Pay For?
A: Based on the type of insurance plan you need, there are several costs that you will be charged. In the case of a deductible, this is the specified amount of money that you need to pay out of pocket before the insurance company can cover the remaining part of your medical costs.
With co-payment, the company will pay for the medical services offered but you must go ahead and take care of the pre-set costs. Not that the preset cost will constantly apply each time you seek medical services and it could be a cheap amount like $25. But according to the Affordable Care Act, preventive and routine care procedures should be fully covered without the policyholder paying the preset costs.
Lastly, there is the co-insurance. This means that you will be required to pay for a certain percentage of the total cost. Understand that these payments depend on the company as well as the type of insurance that you have signed up for.
Q: Is Health Insurance Tax Deductible?
A: In case you have a health savings account or you are self-employed, then your health insurance is eligible for tax deductions. Note that the health insurance premiums can be deducted from your taxes in case you are self-employed. However, if you have dependents and they are covered under a different health insurance plan, the tax canâ€™t be deducted from your premiums.
Q: What is The Cost of Health Insurance?
A: There are a lot of things that affect the estimated costs of health insurance. If you are just starting the application process, understand that factors such as the type of insurance plan determine the amount of premium you will pay monthly. For instance, are you self-employed or do you have an employer?
Besides that, how you make the purchases matter. Take a look at this, if you buy your healthcare coverage via the government exchange program, then the government might give you a subsidy based on your total household income.
Other factors that may affect healthcare premiums include your location, the number of dependents, and the use of tobacco. Generally, the premiums can cost as low as $150 per month to $200. Well, this is for an individual policy. On the other hand, a family policy premium can cost up to 450 per month.
Going back to your employment, your employer might pay for your monthly premiums. However, you might be forced to do this yourself if you are self-employed. Letâ€™s have a look at some of these factors and how they can affect your premiums.
- How much insurance you want: technically, this is simply direct because it would be cheaper to service a $100,000 term life insurance compared to $500,000.
- The type of insurance: generally, term life insurance is usually cheaper than permanent life insurance. Well, this happens because, with term life, you donâ€™t accumulate any cash value. Besides that, its main benefit is to pay for death or funeral costs.
- Age: you are advised to buy a life insurance policy as soon as you can. This is because the older you get, the more expensive it becomes.
- Health profile: those with underlying complications will have to pay more, especially if itâ€™s chronic.
Note: you can always buy life insurance without a medical exam. However, this is considered a medically underwritten type of life insurance and it will lead to higher costs. This is because the insurance company is taking a risk by insuring you even without having an overview of your health status.
Q: How Do I Find the List of Network Providers?
A: Network providers are the healthcare facilities that your insurance company works with. So, the insurer is the one who will provide you with this list. This may be in the form of phone numbers and email addresses, website pages, and links. Additionally, you can simply call your insurer depending on your location regarding the best hospital or facility to attend locally.
Q: Can I Get Coverage if I Have a Chronic Condition?
A: There are numerous private insurance companies that offer coverage for chronic conditions. If you have an illness that has no cure and you will likely not recover, then you can seek one. Some of these conditions include arthritis, diabetes, and asthma.
Generally, chronic medical conditions affect those who are older. But these doesnâ€™t eliminate the fact that it may also affect young adults and kids. However, you will be required to present your medical history. You will also be required to pay high premiums due to the high risk of chronic conditions.
Q: Will My Life Insurance Proceeds Be Taxed?
A: in case the insurance company pays all the proceeds to the named beneficiaries, then there will be no tax charges. However, if the beneficiary is your estate, then the proceeds may be taxed under the estate taxes.
3. Auto Insurance FAQs
Q: What is Auto Insurance?
Auto insurance is a contract between you, the vehicle owner, and the insurance company. As long as you agree to pay the insurance premiums, the insurer will cover any losses as stipulated by the type of insurance. It could be a car accident, theft of the vehicle, or damages caused by other factors.
Q: Do I Really Need to Get an Auto Insurance?
A: Even though it isnâ€™t a requirement in all the states in the US, we think that you should definitely get car insurance if you have a vehicle. Out of the 50 states in America, itâ€™s a legal requirement in 47 states to at least have some form of vehicle insurance before you hit the road.
If you wonâ€™t comply with this rule, then it means that you could be fined or serve jail time. Besides that, your driverâ€™s license might get revoked or you may get suspended as a driver for a certain period. Most of these states normally need basic liability insurance. However, there are a few of them that need additional coverage insurance plans.
Q: What are The Types of Auto Insurance Available?
A: Auto insurance is a broad policy that features different subcategories of policy plans. If you we are to look at in detail, then we can categories these policy plans into 7 main categories:
In America, this is the basic type of auto insurance. The liability policy plan usually covers expenses related to vehicle accidents. This includes car repair, medical costs, and legal fees, in case there is a case. Liability can exist in two forms: property damage or bodily injury.
ii. Collision Insurance
In case you collide with another vehicle or object, then you will get compensated using collision insurance. The coverage usually caters to damages caused by accidents but you first have to pay a deductible. For instance, if you hit another object such as a tree and your vehicle needs repair, you must first pay the deductibles out of pocket before the insurer can compensate the remaining amount.
Note: if the deductible is $500 and the repair costs are $1000, then the insurance company will compensate you $500 but you first need to pay the initial $500 yourself.
iii. Comprehensive Insurance
Vehicles are known to cause damage by accidentally hitting on other vehicles or objects. But sometimes the accident or damage might occur when the vehicle is parked and not moving. For instance, if a tree falls on its roof. If a building collapses on the vehicle, etc.
Comprehensive auto insurance helps to cater to all other costs that are non-related to collisions. However, you should understand that comprehensive insurance is similar to collision insurance. This is because it also has some form of deductibles.
iv. Underinsured/insured motorist
In case another driver hits your car but they donâ€™t have an adequate insurance plan, then this policy can help to cater to that.
v. Rental reimbursement
In case youâ€™ve left your car in the shop for a couple of days but you still need a vehicle to commute, then you will get rental reimbursement.
vi. Roadside assistance
Itâ€™s designed for two services. This can happen when you have a dead battery or get a puncture.
vii. Medical Expenses
Just like the name suggests, medical expenses cover for your medical bills (or anyone else driving the insured vehicle) in case they suffer injuries after an accident.
Q: What Are Some of the Benefits of Auto Insurance?
A: Accidents can happen anywhere at any time. You might be a careful driver, but someone drunk or careless may hit your vehicle and run. Besides that, you might accidentally hit the guardrails or other objects. If not so, sometimes an object might fall on your car and completely damage it.
Overall, vehicle repairs including the minor ones are quite costly. Furthermore, you or the next person may end up with serious injuries and apart from the hefty medical bills, you may end up being sued.
All the damages that result from these accidents are expensive and if you donâ€™t have any coverage, then you might end up spending huge amounts of money. Auto insurance acts as a cushion, protecting you from hefty spending. Whether itâ€™s your fault or not, you will get compensated.
Q: How Much Do I Need to Pay for Auto Insurance?
A: The premiums depend on the type of vehicle, is it new or used? Besides that, your age, area, gender, driving record, and the carâ€™s safety ratings are critical determinants. Furthermore, each state has its own legal requirements and, therefore, the costs vary from state to state.
Regions with high traffic and high rate of car theft are likely to have more expensive premiums. However, you can still get some discounts. For instance, there is:
- A good driver discount â€“ you are eligible for this if you have been driving accident-free for quite long.
- Good student discount â€“ do you have good grades and you are a student? Well, you might just get some auto insurance discount.
- Multi-policy discount â€“ you can be eligible for this if you have used the same company to insure your car and home.
- Multi-car discount â€“ if you have used the same company to insure more than one car, you may get a multi-car discount.
Q: Can I Be Denied Claims?
A: Yes, an insurance company can rightfully deny you your claims. This usually happens if you break the contract by:
- Filing the wrong claim or fraudulent claim. This may involve seeking claims for a coverage that isnâ€™t within your insurance or fabricating an accident
- Improvising your vehicle without notifying the insurance company.
- If you fail to make your premium payments
Q: What will happen if My Car is stolen?
A: Well, this needs to be first verified by the insurance company. So, you need to file a police report and wait because the police will definitely attempt to recover it. If itâ€™s clear that your car canâ€™t be recovered, thatâ€™s when you can officially seek claims but only if you filed for comprehensive auto insurance coverage.
4. Home Owner Insurance FAQ
Q: What is Homeowners Insurance?
A: Whether you are a first-time homeowner or you already have a property, you still need to consider the type of home insurance you choose. Itâ€™s not unusual to find even those with old properties still making mistakes when looking for the right policy cover.
Q: What Factors Can Affect Home Insurance Premiums?
A: There are several factors that can affect your home insurance premiums. This includes the type of building, its value, age, and its location among others. Location, for instance, usually involves factors such as closeness to large water bodies, proximity to fault lines, and fire stations among others.
In case you live in a high-risk area, then be prepared to pay more premiums. Besides that, old homes are considered risky investments due to the need for constant repairs hence the premiums will be much higher.
Q: What Type of Insurance Coverage Can I Choose From?
A: When we are talking about homeowner insurance, this is an umbrella term. There are a few sub-categories that are designed depending on the dwelling, its state, and other structures among others. They include:
- Dwelling insurance and other structure: it mainly covers damages that affect the house in addition to other structures such as the garage and sheds among others.
- Personal property insurance: the insurance covers damages or theft of the policyholderâ€™s premises and valuable. for instance, if your furniture is stolen when you were away, then you will get reimbursed.
- Personal liability insurance: in case another person gets injured while in your property, this type of insurance can help you to cover medical and legal costs.
- Loss-of-use insurance: in case the policyholderâ€™s property becomes temporarily inhabitable as in the case of damages and repair, then they can be compensated for the extra costs they incurred while away from home.
Q: Does the Standard Insurance Policy Cover Everything?
A: No. any type of standard insurance is simply designed to cover the basics. Even though the cover options tend to vary from one company to the next, one thing that remains clear is that there are some things that may need separate insurance.
For instance, earthquakes, hurricanes, volcanic eruptions, and floods are some of the things that arenâ€™t covered by standard insurance. If you live in an area thatâ€™s likely to experience one or more of these conditions, then you might be forced to look for a â€œriderâ€ or an add-on, an additional separate type of insurance.
Q: Do I Really Need Homeowners Insurance?
A: We can tell you for free that a homeownerâ€™s insurance policy isnâ€™t required legally. So, you can stay without out. However, in case you are using a mortgage to finance your property, then itâ€™s a legal requirement that you should consider buying a home insurance plan by the lender.
But why does this happen? Well, while you are still paying for the mortgage, the home isnâ€™t legally yours. Technically, you first need to complete your mortgage payment for you to fully own that property. In the event that your home gets damaged, the mortgage provider will still be able to protect their investment. As a result, you will be able to get reimbursed and repair your home as you continue to make your mortgage payments.
Q: Is There a Difference between Renterâ€™s Insurance and Home Insurance?
A: There is quite a significant difference between the two. For instance, a home insurance plan covers your property and other valuables. Besides that, it may also cover legal and medical costs.
On the other hand, Renters insurance caters to those individuals who live in rental spaces. They might have valuables that they want to protect even though they donâ€™t own the property. Do you get the difference?
So, in case some items are stolen, damaged, or a guest gets injured by these items, then they will be covered. Home insurance is diverse and it covers so many things. Meanwhile, Renters insurance only covers two main things, valuables, and injuries that might be caused by those valuables.
Q: How Much Do I Need to Pay Monthly for Premiums?
A: There are a lot of things that actually affect monthly premiums. Everyone gets to pay a specified amount based on what the insurer finds effective for them. The type of insurance also matters as well as the type of insurance company. Just make sure that you choose an amount that you can afford to pay monthly without delays.
Q: How Can I Calculate The Amount of Home Insurance I Need?
A: Itâ€™s the task of the insurance provider to help you determine the replacement costs of your home. Note that the replacement cost is the total amount that the insurer will incur if they were to rebuild your property and then replace all the valuables.
This is a highly technical calculation but itâ€™s actually straightforward. In some instances, the value of your valuables might appreciate while in most instances they might depreciate with time. However, this wonâ€™t affect the insurance value. This is because if the insurance was to compensate you, they need to restore your home to its original state. You should, however, understand that this value varies from state to state depending on the existing policies.
Q: What is an Insurance Deductible?
A: This is usually the amount of money that you have to incur out of pocket in case you lose your valuables, your property is damaged, and you need to pay for medical, and legal costs. Take a look at this, suppose the insurer puts the deductible at $100 and the cost of damage is $250, then the insurer will need to first cover $100 before the insurer can cover the remaining $150.
But one thing is clear, in case the deductibles are higher, then the premiums will be lower. The converse is also true. But there are two types of deductibles including dollar-based like the one in the above example. You only need to pay the set amount. You can also use the percentage-based deductible.