What is insurance and what kinds are there?
How do I decide which kinds of insurance I should buy?
Am I still covered by my parents' policies?
What kinds of insurance do I not need?
Can I get all the insurance I need from one agent?
What does auto insurance cover?
Should I look into auto insurance before I buy my first car?
Can I get insurance through my employer?
If I receive no benefits through my employment, what do I do?
Does it matter that I'll be moving around a lot in the next few years?
I'll soon be renting my own apartment. Is there insurance for that?
Do I need insurance if I go into business for myself?
Will getting married change my insurance needs?
How will becoming a parent affect my insurance needs?
How do I file a claim?
Help! I've lost everything! Where do I start?
Who keeps an eye on the insurance companies?
What factors affect the cost of insurance?
What should I look for in an agent?
What is insurance and what kinds are there?
Insurance is a means of guaranteeing your financial protection against various
risks. There are different kinds of insurance to cover different circumstances.
Policies are available for business purposes and for personal needs. Personal
insurance is divided into:
• Property/Casualty Insurance—Provides protection for property like homes,
cars and house-hold possessions, in addition to protection from liability as
a result of their use.
• Life Insurance—Provides funds to a designated beneficiary or beneficiaries
in the event of an insured’s death.
• Health Insurance—Pays for costs related to your health (e.g., doctor
visits, hospital stays and diagnostic tests). Disability Insurance, a form
of insurance that combines elements of life and health insurance, pays you
for income lost due to a disabling injury or illness. Life, health and disability
insurance are often provided through employers. Ask your employer about these
coverages and check with your agent to make sure they meet your needs.
• Government Benefits—As a working person, you pay for insurance programs
run by the federal government. Social Security is a retirement and disability
program in which almost all workers in the U.S. are required to participate.
Medicare is the federally-sponsored health program for persons over 65 and
individuals with disabilities. Medicaid is jointly funded by the states and
the federal government to extend health coverage to poorer Americans. In addition,
laws in most states require employers to carry workers compensation insurance
so that workers injured or exposed to an illness on the job can receive compensation.
Many states also require employers to pay into unemployment insurance, so if
a worker is laid off, he or she will receive some money while seeking a new
job.
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How do I decide which kinds of insurance I should buy?
You probably should consider five basic lines to see if they apply to your
situation:
• Auto insurance—If you own or lease a car or are planning to in
the near future, you will want to protect that investment with auto insurance.
This coverage helps you cope with the expense of accidents, vandalism or theft.
In addition, if you are financing the vehicle, the lending institution probably
will require that you carry auto insurance. Another area that needs protection
is your liability. If you are sued because of damage your vehicle caused, auto
insurance will help with legal expenses and any damages you have to pay.
• Health insurance—To cope with today’s high medical costs, virtually
everyone needs health insurance. Following graduation, you may no longer be
covered by your parents’ policy, so you may need one of your own.
• Homeowners or renters insurance—Whether you own a home or rent
an apartment, you want to make sure your possessions are protected. Both homeowners
and renters
insurance offer comprehensive coverage at home and when you travel. They also
offer liability protection should you be sued.
• Life insurance—If you have dependents or are interested in purchasing
life insurance that builds value as you pay the premiums, talk with your agent
about the plans available.
• Disability Insurance—This is designed to provide required income
should you be injured or disabled. The extent of coverage should be enough so
that,
when combined with your other assets, you would have enough to live on.
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Am I still covered by my parents' policies?
It depends on the policy and its terms. For example, most health insurance
policies cover the insured’s children up to age 18, or to age 22 if the
child continues as a full-time student. If you are over 18 and not a full-time
student, you will need your own health insurance policy. Check with your insurance
agent about specific insurance policies and any age restrictions involved.
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What kinds of insurance do I not need?
You probably do not need the following unless there are special circumstances:
• Air travel insurance. It costs too much and is not comprehensive.
• Life insurance if you are single with no dependents and do not have your
own business.
• Very specific policies like contact lens insurance or cancer insurance.
It is usually better to have comprehensive policies like renters or health.
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Can I get all the insurance I need from one agent?
Yes. Most agents are licensed in their states to sell
various lines of insurance.
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What does auto insurance cover?
• Auto insurance is divided into several different
types of coverage:
• Liability covers damage to other people’s property and injuries
you may cause while operating an automobile.
• Collision covers damage to your own vehicle in an accident.
• Other than collision covers fire damage to your vehicle, break-ins, vandalism
or theft, as well as natural disasters {earthquake, hail, hurricane, flood,
etc.—unless the vehicle is overturned, then it is considered a collision).
• Medical payments insurance guarantees emergency and related medical payments,
usually in the range of $5,000 to $10,000, for you, your passengers and other
parties, regardless of who is at fault. It also covers you and members of your
household in any accident involving an automobile, whether you are on foot,
in a friend’s car or riding a bicycle, etc.
• Uninsured motorist (UM) and under insured motorist (UIM) coverage protects
you and your passengers if injured in an accident with drivers carrying insufficient
liability coverage.
• Extra coverages include expenses for towing, labor and temporary replacement
vehicles, etc. These are generally defined as add-ons or endorsements to your
policy.
Your agent can offer you more information on the limits and types of coverage
that will best suit your situation.
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Should I look into auto insurance before I buy my first car?
Yes. Factors such as safety and frequency of theft of specific makes and models
can play an important role in determining your insurance rate. Some cars are
safer than others to drive and some are less apt to be stolen. Choosing one
of these will help lower your insurance rate. Your insurance agent can help
you estimate your insurance needs and premiums.
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Can I get insurance through my employer?
Probably. Check to see if you can receive health,
disability and life insurance through your place of employment. If there are
several different plans available,
be sure to examine each thoroughly to find the one that best fits your needs.
Ask your company’s program administrator to explain the employee benefits
thoroughly.
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If I receive no benefits through my employment, what do I do?
Check with your parents to see if you are still covered under their policies.
If not, your insurance agent can explain the plans available and the best match
for your needs.
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Does it matter that I'll be moving around a lot in the next few years?
Yes. Your policies usually can follow you, though
some adjustments may be necessary. To keep your coverage intact, it’s
best to keep your insurance agent posted on address changes.
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I'll soon be renting my own apartment. Is there insurance for that?
Yes. Renters insurance is a property/casualty policy to protect your property
and to protect you against liability. For example, if someone slips and falls
in your apartment, you may be held liable for the injury. Renters insurance
would cover that accident. All your possessions up to the monetary limits listed
in your policy also would be covered for specified damages (both at home and
when you travel).
If somebody sues for damages caused by you or your possessions (other than
a vehicle covered by your auto insurance policy), your renters insurance policy
would cover the cost of the lawsuit—both defending it and settling it
if necessary—up to the limit of coverage chosen.
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Do I need insurance if I go into business for myself?
Yes. Commercial or business insurance, like the personal insurance described
thus far in this guide, offers property and liability coverage.
If you are self-employed, in effect you own your own business and are responsible
not only for your own equipment and supplies but also for any damage to your
clients and their property.
If you are looking at seasonal employment with another young person or an informal
group of young people who have started their own business, be sure to check
to see if they have the necessary insurance and that you are not personally
liable.
Speak with your agent for more details.
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Will getting married change my insurance needs?
Yes. It may increase your needs in some areas (more
property insurance if you are combining households) and decrease them in other
areas (one of you may
be able to receive coverage under the other’s health plan; two vehicles
can be covered under one policy, which is usually less expensive). If you receive
health and life insurance at work, consult with your program administrator
to make adjustments. For other policies, such as automobile insurance, talk
with your insurance agent.
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How will becoming a parent affect my insurance needs?
Check your life insurance terms. You may want to increase the amount, change
the beneficiary, or, if you have no life insurance, purchase a policy. Also,
because your child will need health insurance, you should see if dependents
can be added to your current plan.
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How do I file a claim?
You file a claim with the insurance company that issued your policy. To file
a claim on health insurance received through your employment, check with the
insurance program administrator at work. If you need to file an auto claim
or other property damage claim, check with your insurance agent.
Be thorough and exact when reporting damage and always tell the truth. Withholding
vital information or exaggerating the facts can not only lessen your chances
of the claim being settled to your satisfaction, but also may be considered
a crime. (Insurance fraud costs consumers millions of dollars a year. In fact,
a dime of nearly every dollar of your premium is used to cover fraudulent claims.)
Once your claim has been filed, an adjustor will be assigned by the insurance
company. He or she is charged with investigating your claim and then making
a recommendation to the insurance company. The recommendation can be to accept
the claim and pay the full amount requested, accept part of the claim and make
partial payment, or refuse the claim and make no payment. The insurance company
will then make a decision regarding your claim and notify you of its final
decision.
The amount of compensation offered can vary according to the adjuster’s
analysis. You do not have to accept the first amount offered if you feel it
is too low. While you may have to do some researching to prove a higher payment
is valid, it may be worth it. Your agent should be able to assist you.
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Help! I've lost everything! Where do I start?
The best place to start after a great loss of property is with an inventory
of that property. And the best time to make an inventory is before all is lost.
If most of us suddenly found ourselves without anything due to some calamity,
we would be hard pressed to know all that we had lost. When was the last time,
for example, that you counted the number of shoes or CDs you own, not to mention
furniture, dishes, or audio/video equipment? How much is it all worth and where
would you start if you had to replace it?
Now is the time to make a list of your major possessions. Where possible, it
is wise to list the item’s serial number, date and cost of purchase and
to hold onto the receipt.
Perhaps an even easier way to inventory your possessions is to use a still
or video camera. As you take the video, you can also talk about the items,
when you purchased them and how much they cost.
Whichever method you choose, have a copy made. Ask a friend or family member
to hold on to it. Or store your copy in a safe deposit box. Also, check with
your agent, who may be able to store a copy for you. If the worst happens and
your possessions are destroyed, the inventory will be safe at another location.
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Who keeps an eye on the insurance companies?
Insurance is a heavily regulated industry. Every state
has some sort of department, administration or agency that regulates and monitors
every insurance company
operating within the state’s borders. In addition to approving rates,
your state’s insurance department is involved in all insurance matters
on behalf of private citizens and businesses. It issues operating licenses
to insurers and agents, based on their ability to meet the state’s requirements
for conduct and knowledge about insurance issues.
Your insurance company and agent work closely with your state’s insurance
department to make sure you are getting the best and fairest possible service
within the state’s guidelines. If you ever have difficulty settling a
claim, work with your agent to resolve the difficulty. You also can contact
your state insurance department (listed in the back of this guide) if you wish
to know more about your options and rights as an insurance consumer.
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What factors affect the cost of insurance?
• The likelihood of a loss occurring—The
greater the probability a loss will occur can mean a higher rate {e.g., earthquake
insurance in California).
• The potential size of the claim—If you purchase a large amount
of coverage (that is, if the item you are insuring is quite valuable), the chances
are
there could be a large claim and the premium will need to cover that possibility.
• The percentage of loss the insurance company will be required to pay—If
you have no deductible, the company will pay 100% on a covered loss. This increases
their risk and your premium. To understand how a deductible works, consider
the following: If the deductible on your auto insurance is $100, it means you
agree to pay this amount first, and your insurance company will pay for damages
exceeding this deductible. By increasing your deductible from $100 to $250,
or even $500, this decreases the insurance company’ risk, which may mean
a savings in your premium.
Other factors can influence premiums such as the number of lawsuits and the
average amount awarded in a given state. In short, your insurance company tries
to ascertain how much it needs to accumulate to cover all the claims it will
receive.
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What should I look for in an agent?
Agents are there to help you. At the most basic level, any agent should be
able to answer your questions about insurance, provide you with a thorough
assessment of your insurance needs and offer you a choice of insurance products
to meet those needs. Also, your insurance agency should provide you with prompt,
quality service in the case of a claim.
Just as important is the level of professional confidence and personal comfort
you feel with the agent. Many people stick with the same insurance agent for
decades, even generations. It helps to find an agent you can get to know and
trust.
An important, but sometimes overlooked, factor to keep in mind is that there
are two kinds of insurance agents: those who represent only one insurance company
and those who represent more than one insurance company.
Agents offering through their agencies only the policies of one insurance
company often are referred to as “captive agents” because the
company they represent does not allow them to offer their customers competitive
alternatives.
By contrast, agents offering through their agencies the policies of more
than one insurance company are called “independent agents” because
they can shop around for their customers for the best insurance values among
a variety
of competing companies.
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