Insurance provides a safety net to help you recover from a financial disaster like a burglary, fire or lawsuit. It can even cover losses that threaten the financial security of your family, such as the cost of college tuition for your children or an unexpected death. However, it’s important to understand the basics of insurance requirements and how they work before you buy a policy.
In general, an insurance policy is a legal contract that sets out the terms and conditions of coverage. It specifies what property is covered, how much you have to pay for a claim and the premium you must pay in exchange for this coverage.
The policy also usually contains provisions and exclusions that describe what is and is not covered by the insurance and how to file a claim. For example, a policy may exclude coverage for jewelry that you wear or valuable papers that you store at home. It might also include a deductible, which is the amount you must pay out of pocket for each covered claim before the insurer starts to pay.
Many people take out multiple policies, called an “insurance portfolio,” to protect against different types of loss and exposure. This is generally more expensive than buying individual policies but it can provide greater protection in the event of a loss. Some common forms of insurance are private passenger auto, homeowners, commercial property and workers’ compensation.
Some states require that businesses carry liability insurance, sometimes referred to as business owners’ liability insurance, before they can get a license to operate. Liability insurance protects businesses in the event that someone sues for damages arising from their operation. It is possible to obtain specialized insurance coverage for specific operations, such as professional liability or environmental risk.
Homeowners’ insurance is not required by law in most countries but it is often a requirement of mortgage lenders. This type of insurance covers the structure of your home as well as other structures on your property, such as sheds and detached garages. It also covers your personal possessions, such as furniture and electronics, as well as your personal liability for damage or injuries to others that occur on your property.
Most health insurance plans require a minimum level of coverage, usually known as the essential benefits standard. This includes coverage for preventive care, hospitalization and emergency room services. It may also pay for medications and some experimental treatments. You can obtain this coverage through your employer, a public program such as Medicare or Medi-Cal or from a private health insurance company.
Insurance companies are not allowed to discriminate on the basis of age, gender or other factors that could be considered protected classes under state laws unless they can show that these factors significantly increase their risk of loss. The company can also not charge you more than other customers in your class unless they can show that the higher rate is warranted by your increased risk. 501(c)(3) insurance requirements