Car Insurance Homeowner's and Property Insurance Life Insurance Health Insurance

Insurance is almost a way of life in America.  We insure ourselves to receive payments in the event of health problems, accidents, property damage, business losses, and especially our lives. Some types of insurance are required by state law, such as automobile insurance. Banks require insurance on your property to loan you money to buy a home. However, much insurance is optional, including life insurance. This section gives you the basic information you need to better understand the insurance business in the USA.

Car Insurance

Car insurance (auto insurance) is an important way to protect yourself against damage and losses from a vehicle accident.  There are many car insurance companies in the United States that offer comprehensive financial protection at competitive rates. The details and terms of your insurance plan depend on the policies of company you choose. Each insurance company offers different coverage levels.  To find the best plan for you, stay informed about your company’s policies and coverage terms, and don’t hesitate to change companies if you find a better policy from another insurance company.

In some states, it is illegal to drive without car insurance—and penalties for not purchasing auto insurance can involve monetary fines and/or the loss or suspension of your driver’s license.  Contact your local Department of Motor Vehicles (DMV) to find out more about your state’s auto insurance laws.

Car Insurance basics

Car insurance plans cover the insured party, the insured vehicle and, in most cases, the "third party" involved in an auto accident.  Plan ahead for potential accidents by staying informed and reviewing your insurance policy with your insurance carrier to make sure you have enough coverage for your situation.

Premiums. Premiums are the fees you pay to the insurance company—usually on a monthly basis—to insure your car in the event of an accident.  Premiums vary depending on various factors that are determined by your insurance provider.  These factors may include your driving record, age, gender and/or your predicted annual driving distance, among other things.  Insurance companies rarely disclose the particular reasons for determining the amount of your premium, but premiums are typically higher for young drivers and for people with a poor driving record.  

Liability.  Liability is the foundation of auto insurance; it is illegal in most states in America not to hold liability insurance. Liability insurance pays the financial losses and damages caused to others in an auto-related accident.  These costs may include bodily injury, vehicular damage or property damage involved in an accident.  You can purchase liability insurance in two categories: “combined single limit” coverage or  “split limit” coverage.

• Combined Single Limit. Combined single limit liability insurance covers both bodily injury (to anyone involved in the accident) and property damage that may result from an auto accident.

• Split Limit. Split limit liability insurance divides bodily injury (to anyone involved in the accident) and property damage coverage into two separate coverage categories.

Collision.  Collision coverage insures your vehicle if it is involved in an accident with another vehicle or multiple vehicles.  Whether or not you are at-fault in the accident, collision insurance provides financial payments for repair to damage to your vehicle.

Deductibles. A deductible is the portion of the repair cost that you agree to pay your insurance company when an accident occurs. Deductibles range from as low as $50 to $1000 or more. Your insurance company will pay for the repair costs after you pay the deductible.  Deciding the amount of your deductible is important. Lower deductibles may save you money if you get into an accident, but they also typically carry a higher monthly premium. Higher deductibles will lower your monthly premium, but in the case of an accident, you will be faced with a higher repair cost.

“Totaled” Vehicle.  If your insurance company determines that the cost for repairs to your vehicle exceeds value of the vehicle, it considers the vehicle “totaled.” Instead of repairing it, your company will pay you the market value amount that the vehicle was worth before it was wrecked.

Comprehensive. Comprehensive coverage insures your vehicle in accidents that do not involve other vehicles.  These accidents may include theft, fire, vandalism, or colliding with an animal.  Comprehensive coverage also comes with deductibles. If you get in an accident while driving someone else’s car, you are insured under that person’s insurance policy, not your own.

Car Towing. Car towing coverage, also known as roadside assistance coverage, insures costs involving towing your vehicle if you breakdown, or in the event that it is un-drivable following an accident.  

Uninsured Motorist. In an accident where the at-fault party has insufficient insurance or does not have insurance at all, uninsured driver’s coverage serves as the at-fault party’s insurance company by covering the costs of any incurred damage.  Uninsured motorist coverage also pays for damage or losses in the case of a hit-and-run incident where the at-fault party is unknown.

How do I select an auto insurance company?

With all the auto insurance companies that exist today, it can be confusing to wade through the various policies and plans. To make it a little easier, keep in mind these main points when selecting an insurance company:

Price. Shop around!  Prices vary a great deal.  It is a good idea to get “quotes” from 3 to 5 different insurance companies to compare their pricing policies.  Try using the Internet to compare prices.  There are numerous online databases that show price comparisons of popular auto insurance agencies.

Customer Service. As the consumer, you deserve quality service from your auto insurance company.  Choose a company that you can trust to respond quickly and effectively to your questions, concerns, and claims.  Talk to several insurance agents before you choose your company.  Don’t hesitate to switch companies if you feel that the service is sub-par.

Licensing. Keep in mind that not all insurance companies are licensed in every state.  To confirm that a company is licensed in your state, contact your state insurance department. 

Homeowner’s and Property Insurance

Homeowner’s Insurance compensates you, the homeowner, against damages to your property, theft, and other harm to the property.  Additionally, many insurance policies will cover losses of living expenses due to the time the home is unable to be lived in.

Property Insurance is coverage that extends beyond the home to provide insurance for any type of owned property.  This could include an office or a building that you might own.  It provides you compensation for damage due to fire, vandalism and theft, among other things.  There are two types of property insurance: “open perils” and “named perils.” Always make sure to read insurance contracts carefully before signing them.

Property insurance terms

"Acts of God" refer to particular disasters, including floods, hurricanes, earthquakes and terrorism.  Check with your insurance company to find out the details of its property insurance contracts.

Named Perils insure only specific risks, which the you must list in the policy contract.

Open Perils insure all other circumstances of property loss, except for risks specifically named in the policy contract.  These exclusions often include events known as “Acts of God.”

Paying premium charges

Insurance companies generally bill a premium charge on a monthly basis for homeowner’s insurance, renter’s insurance or property insurance.  The amount of your premium depends largely on the property’s proximity to areas of high risk.  For instance, people living in regions with a high rate of wildfires typically pay higher monthly premiums.

Life Insurance

A life insurance policy gives the policyholder’s beneficiary a fixed sum of money on the death of the policyholder.  Life insurance plans require you to pay a premium, or fee, on a regular basis. At the time of death, the insurance company will pay a predetermined sum of money to beneficiary, the person chosen by the policyholder to receive the sum of money (often a spouse or family member of the deceased).  The amount of the premium payment determines the amount of your life insurance payment; the higher the premium typically guarantees a larger ultimate sum.

Life insurance covers both death by natural causes and accidental death, but may also include health coverage for people diagnosed with terminal illnesses, permanent disability and/or long-term care.  Alternately, some life insurance policies do not offer payments for some types of death, including casualty in war and suicide.  Make sure to know the terms of your life insurance policy before you finalize the contract.

Life insurance costs vary based on your age, gender, lifestyle and many other factors.  For example, a 30 year-old non-smoking male would pay, on average, $200 a year for a $250,000 policy.  There are two primary types of life insurance policies, “term” and “whole” life insurance.

“Term” Life Insurance. Term life insurance is widely believed to be the most cost-effective and simple insurance policy you can buy. Term life insurance plans require a yearly premium, or fee, for a fixed period (the term).  If you die while you’re insured, your beneficiaries will receive the full amount of your coverage.

 “Whole” Life Insurance. Whole life insurance covers you for your entire life, not just for a fixed period, like term insurance. Whole life insurance also differs from term life insurance in that is builds cash value, which your insurance company invests. Your cash amount is tax-deferred until you decide to withdraw it.

Health Insurance

Health insurance protects you financially if you need to see a medical doctor, visit the dentist, get a vaccination or obtain prescription medicines, among other things. Health insurance is typically provided by a private health insurance company or covered through your employer.  Without coverage, the costs of medical care in the United States can be extremely expensive.  Paying out of pocket for hospital bills is the single leading cause of bankrupcy claims in the United States.  Since illness is so unpredictable, so you should definitely consider a health insurance plan as soon as possible.

What type of health insurance should I buy? Choosing a health insurance plan Disability insurance

What type of health insurance should I buy?

There are two main categories of health insurance: group health insurance and individual health insurance.

Group health insurance plans. Group health insurance is most common coverage plan in the United States.  Costs are typically paid for by your employer—and is usually less expensive than individual health insurance.  Some group insurance plans offer only one type of health care, such as an HMO (Health Maintenance Organization).  Other employers give you a choice.

Not all employers cover the health insurance of their employees. If you work part-time or for a small business, your employer might not cover you. If this is the case, you can also try to attain group insurance through labor unions and other professional associations.

Individual health insurance plans.  Individual health insurance plans require that you choose your health insurance on your own. You can choose from the four primary types of managed health care: fee-for-service, HMO, or PPO protection.  Individual health plans can be very costly, so be sure to shop around.  Generally speaking, individual health insurance does not provide the broad range of benefits and services as those of most group health insurance plans. Here are some helpful tips to know about individual health insurance:

• Do your homework! Don’t hesitate to contact different insurance companies since costs and coverage vary from company to company. As the consumer, you are always allowed to ask your agent about policies from other insurers to compare them.
• Make sure you read and understand the policy in full.  A good policy will include coverage for large medical costs.  If you have any specific medical needs, make sure the policy you choose covers that particular medical care.
• Know the date your policy starts, as some policies include a waiting period, during which you are not yet covered.
• Keep in mind that you are allowed a certain amount of time to confirm your decision in an insurance company.  This is sometimes called a “free look” clause—and it typically lasts for one to two weeks.   Within this time, you can return the policy and be refunded in full.
• Be especially careful with insurance policies for single diseases, such as cancer.  These plans can be expensive and your regular health plan may already cover what you need.

Choosing a health insurance plan

Managed care is the term used to describe the contract between insurance companies and doctors/hospitals to provide you with health care services. Many people get managed care through their employer.  In that case, the employer pays for the managed care plan in advance to cover all of your health care.  When you need to seek medical care, your managed care must approve the doctor or hospital you go to.  If your managed care plan does not approve of a particular doctor or hospital, you may have to pay more for medical care.

The four most common managed health care plans are:

1) Health Maintenance Organizations (HMOs)

• Health maintenance organizations (HMOs) are prepaid health care plans that provide comprehensive care for you in exchange for a monthly premium.  HMOs include doctors' visits, emergency care,  x-rays, surgery, hospital stays, lab testing, and some types of therapy. HMOs typically limit your choice in doctor or hospital to those who have prearranged agreements with your HMO.  Of course, in serious emergencies, your HMO will almost always cover your expenses, no matter where you seek care.
• HMOs require that you choose one doctor from within a specific group of health care providers to be your primary care physician (PCP).  This is the doctor from which you can be referred to specialists, labs, surgery procedures, etc.
• HMOs generally involve a nominal "co-payment" fee for doctor’s visits or hospital care.  Co-payments can range from $5 to $25.
• Your HMO will issue you a member card, showing your name and policy number.  You will be asked to show your card when you visit the hospital or doctor’s office. 

2) Preferred Provider Organizations (PPOs)

• Preferred Provider Organizations (PPOs) are a combination of a fee-for-service plan and an HMO. Your choice in doctors and hospitals, as with an HMO, is limited, but you do not have to fill out your own medical forms, as you do with fee-for-service plans.
• Most PPOs pay for preventive health care, which usually includes doctor visits, baby care, mammograms and immunizations. 
• PPOs usually involve a co-payment for each visit.  In a PPO, you can see doctors who are out of the agreed-upon group and still receive a portion of coverage, but in this case you may have to fill out your own forms and pay a higher cost than usual. 

3) Fee-For-Service plans

• Fee-for-service offer you the most options and the most flexibility; you can choose any doctor you wish (with the exception of some specialists), change doctors, and visit any hospital in the United States. The most traditional type of health care policy, fee-for-service plans pay for the services administered to anyone insured on your insurance company’s policy in return for a premium, which you pay your insurance provider on a monthly basis.  
• Fee-for-service plans require you to pay "coinsurance". Coinsurance is the amount you pay for medical care after you have met the amount of your deductible.
• The main drawback of a fee-for-service plan is that you are responsible for filing out all the medical forms and policy agreements involved in your medical care.  
• There are two kinds of fee-for-service coverage: major medical and basic medical.  
1. Basic protection pays for any costs for your doctor’s visits or hospital care, including, often times, prescription medicine and x-rays. Some basic coverage plans also cover certain types of surgery.
2. Major medical insurance pays for higher cost health care needs, such as long-term illnesses, or serious injuries.
• Some policies combine basic and major medical coverage into a comprehensive package—find out your company’s policy.

4) Point of Service (POS) plans

• A POS plan combines details from both HMOs and PPOs. As with HMOs and PPOs, point of service plans involve small co-payment and no deductibles (if you are in-network).
• Unlike HMOs, point of service plans allow you to go out-of-network, if desired, to seek medical care.  For instance, if your primary care physician makes a referral out of your insurance company’s network, your POS will pay cover some of the bill, though rarely the entire amount.
• Like HMOs, POS plans require that you choose a primary care physician (PCP).
• Make sure that the POS plan you choose will cover your specific medical needs.

Disability Insurance

Disability insurance covers any income you lose due to a disability or long-term illness or injury that prevents you from working.  Ask your health insurance representative if your policy includes disability insurance.  Also, check to see if your employer offers a group disability insurance package.