INSURANCE POLICY WHAT ARE ITS CHARACTERISTICS AND HOW DOES IT WORK?
Are you looking for your first insurance policy in the US ? Do you want to know the basics of a policy before making the final decision? Then this article is for you. In this guide we talk about insurance policies , their operation, special features and more. Do you want to know more information? So, continue reading.
An insurance policy is often also called an adhesion contract and is an agreement between you and the insurer you have chosen. When you decide to buy a policy, you are accepting the terms and conditions of the contract; In general, insurance policies provide coverage in various areas such as: Health, life, house and home, automobiles, motorcycles, pets, travel and more.
In general, after you register on the issuer’s website, and make your first official payment, you will receive your insurance policy by conventional mail. Also, in some cases you can receive your registration form directly by email. A series of data are described in the registration forms, such as:
Insurance policy number
scope of coverage
Policy terms and conditions
Important: When it comes to choosing an insurance policy, it is always a good idea to check in advance what is covered and what is not covered by your insurance policy.
All the important details about the policy contracts are found in a section called « Coverages «. Likewise, if you’re looking to look at the total amount of coverage , you can find that information on your declarations page (usually on the front page of your policy). Finally, in these documents you can see information about the breakdown of the premium , as well as your deductible and the total duration of your coverage.
What is a personal insurance policy?
Personal lines of insurance are types of insurance you buy to protect yourself from risks that could create financial losses you can’t cover on your own. That is, personal insurance is related to the risks that you, as an individual, may face due to accidents, illness, death or damage to property that is in your name.
How does an insurance policy work in the US?
When you buy insurance, you will normally pay a pre-agreed amount called “the premium”; In exchange for the premium you pay, the issuer agrees to compensate you for any losses or damages , should anything happen. Likewise, personal insurance is based on the principle that the distribution of a risk among several people makes it much more manageable. Many people pay for loss protection through their insurance policy premium. The premium is collected by the insurance company when it is time to pay a claim; that is, they take money from that “charge” to compensate the insured.
Do all US citizens have to buy an insurance policy?
Not everyone has to buy insurance, however, it is a good idea to buy insurance when you have a financial risk or investment that may be affected in the future. Therefore, and depending on the type of insurance, some policies may be completely optional; while other insurance, such as car insurance, is mandatory because it is required by law.
Basic Concepts of Insurance Policies in the US
Below, We list some basic terms that are part of the vocabulary of an insurance policy . In this way, you will be able to know and understand which ones can affect you when you decide to purchase an insurance policy…
The deductible . It is the amount of money that you will pay in a claim. Remember, the higher your deductible, the more risk you personally assume and therefore the less you will pay in the form of a premium or monthly fee . In fact, some people use the deductible as a strategy to save money.
Policy type . Insurance companies offer various levels of coverage. Almost every time you get a really low price on an insurance quote, you should ask what kind of policy they have or what the coverage limits are and compare these details.
special limits . All insurance policies contain certain sections that list limits on amounts payable. This point is really important when making a claim. So, it is best to ask about the types of coverage and whether or not they are limited.
Exclusions . These are aspects that are not covered in the insurance policy that you will buy. It is very important to ask about the exclusions in any policy you purchase so that the fine print does not surprise you when you need to make a claim .
Waiting periods and special clauses . Some types of insurance have waiting periods before coverage kicks in. It’s important to ask when coverage begins and if there are any waiting periods or special clauses that could affect your coverage when you purchase a new policy.
Claims Agreement . The basis of the claims settlement represents the terms under which the claim will be paid. The terms and conditions of the claims settlement make a significant difference in the total amount the insurer must pay you.
Types of Insurance Policies
If you are looking for insurance , you first need to know what are the different types of policies that you can find in the market; in addition to informing you about its various uses and benefits . Below, we show you the most common policies, their general characteristics and their importance in everyday life.
Health Policy (Health Insurance) in the US
Who needs it? Everyone.
Because you need it? You will get medical coverage in case of emergencies.
Health insurance is a contract between a health insurer and a policyholder; where it is specified that the insurer will pay all or at least part of the medical expenses. This is a basic type of insurance that all families should have and can have many variations depending on the issuer of the policy . Likewise, this type of policy covers health care expenses , both expected and unexpected. It usually includes:
Routine doctor visits
Health insurance in the US is easily one of the most important types of insurance you can have. If you develop a serious illness or have an accident without being insured, you may not be able to receive treatment or even have a debt with the hospital. Fortunately, many employers provide health insurance benefits to their full-time and even some part-time employees. If you currently do not have health insurance coverage, this is the first option to consider.
Important: When choosing a health insurance policy, consider co-payments, deductibles, premium costs, network coverage, and covered expenses to determine which is the best option.
Car Insurance in the US
Who needs it? Frequent drivers.
Because you need it? Driving without auto insurance is illegal in the US
It is an auto insurance that generally offers policies for motorcycles, boats, trucks, conventional cars and other vehicles. The main function of this policy is protection against collision, theft, vandalism, physical damage or bodily injury that could result from driving; Also known as liability coverage . This policy can be of great help in case of recklessness on the road , accidents with uninsured drivers and more.
Most states require by law that you have basic car insurance that covers accident liability. However, the use of this policy can be very varied. For example, if you’re buying a car through a loan, you may also need to drop collision coverage. On the other hand, the most common reason for car insurance is to cover the replacement of an expensive asset. Just like a house, cars can be quite expensive, and if they break down, you’ll want to be able to repair or replace them.
Life Insurance in the US
Who needs it? All /Persons with dependents (children or spouse).
Because you need it? Funeral expenses can be expensive, these policies ease the financial burden on the family.
It is an insurance policy that is activated in the event of death ; Generally, a life policy pays the beneficiary an agreed amount of money to cover expenses left behind by the deceased. Remember, a beneficiary is the person or entity named in a policy that receives benefits, such as a spouse.
If you don’t currently have life insurance, the best thing to do is check with your employer first. Since many employers offer basic group life insurance as a priority one (1) benefit; Also, some companies allow you to purchase additional coverage at a very affordable price. Life insurance is divided into two large groups that are:
Permanent life insurance . This type of insurance offers you coverage for life, as long as you pay the premiums or monthly installments on time. This type of coverage also allows you to build cash value with which you can borrow or invest for growth.
Term life insurance . It is also called term life insurance and offers coverage for a specified period , usually 10 to 30 years. Term life insurance tends to be more flexible and less expensive , but if you’re looking for an investment component, you may prefer permanent coverage.
Home Insurance in the US
Who needs it? Property owners.
Because you need it? You will save money on maintenance costs; You will have coverage for incidents such as floods or fires.
This type of insurance is one of the most requested within the US . Insurers offer policies with various coverages for the home. This type of benefit will help you in case of fire, flood, environmental catastrophe loss, theft, vandalism and more. Also, homeowners insurance covers the house you live in and any associated structures, such as a porch, garage, and balcony.
Like any other type of insurance, take the time to compare coverage and premiums . Homeowners insurance, for example, may not cover flood damage or earthquake damage. So if you live in an area prone to such events, you may need to supplement your policy with additional natural disaster coverage . After all, all these special features may vary depending on the issuer.
Renters insurance in the US
Who needs it? Real estate tenants.
Because you need it? It is convenient to have this type of insurance when we want to avoid paying for possible accidents during the stay in the rented property.
This insurance is intended for people who rent a property. It is a fact that renters are exposed to costly accidents and many times must pay the full cost of repairs inside the rental housing . By requesting this type of insurance, you will save time and a lot of money. Likewise, tenants use this insurance to cover the personal property of third parties in case of partial or total damage or theft, which is not the responsibility of the owner .
Who needs it? Frequent travelers.
Because you need it? Before traveling, it is best to pay for a travel policy that covers cancellations, lost luggage and medical attention .
Travel insurance covers trip cancellations , lost or misplaced luggage, travel accidents, and even medical expenses while on vacation or while abroad. If you are a frequent traveler, it is best to make sure you have this policy; remember, accidents happen and they can be really expensive when you’re away from home.
The vast majority of typical major health insurance policies only offer an element of travel insurance to the extent that it involves emergency care. There are often very restrictive provisions about what is and is not covered, so we need to pay attention to the fine print. Likewise, if you are a person who plans to travel, it is best to buy a travel policy with specific benefits .
Some of the features to look for in a travel insurance policy include:
Major medical coverage, accident and immediate transfer.
Immediate transportation home in case of serious illness or accident
Who needs it? Anyone who is already insured.
Because you need it? People looking for additional coverage, for example: Protection for a second vehicle, or home.
General insurance will protect you even more from the risk of having to face payments for damages, theft, vandalism and any other unexpected accidents. Often times, policy issuers can offer customized packages based on your needs. This insurance was designed to cover the expenses that exceed the policies already contracted.
Think of an umbrella insurance policy as an additional option. For example, in the event of a car accident, your basic car insurance will pay and compensate you for the loss. However, your car insurance may not fully cover the damage caused to your vehicle; in this case, having additional coverage is best.
Who needs it? Pet owners.
Because you need it? Cover your pet’s medical expenses.
Pet insurance (primarily for cats and dogs) covers the bulk of veterinary treatment costs when a pet is injured or ill. In general, paying for insurance of this type is much more profitable in the long run ; and it is usually a better option than paying separately for the pet’s medical expenses . In this section, there are two main types of pet insurance that are:
Basic Plan . Wellness insurance that covers routine visits and vaccinations.
Complete plan . Health insurance that focuses on routine visits, vaccinations, genetic diseases, diabetes treatment, cancer and major surgeries.
Other insurance requested:
Additional wildfire policies
How to decide which insurance policy you need?
The insurance you need can vary depending on where you are in life, what kind of assets you have, and what your long-term goals and responsibilities are . Therefore, it will always be important for you to take the time to review your options and consider which insurance policy is right for you. Remember, finding the right insurance products is a big part of a sound financial strategy that will help keep you stable for the long haul. Finally, we have prepared a series of questions that you can ask yourself in order to choose the ideal policy for you.
Before making the final decision, consider:
Do you have the money to cover your costs or debts if you have an accident?
Do you have enough savings to cover an accident or illness?
Can you pay higher deductibles to lower your insurance policy costs?
What worries you most?
How to apply for an insurance policy in the US?
Find and contact an agent, broker or assistant . In this case, you’ll need to enter your zip code to get a list of local people and organizations. Also, some insurance brokers offer help in languages other than English (particularly Spanish).
Try to get an insurance agent or broker to contact you . Visit the issuer’s official website and fill out the form with your information and a registered agent or broker will contact you directly.
Use the website of a Certified Enrollment Partner . You can apply for and enroll in marketplace policies through an approved enrollment partner’s website. For example: An insurance company or an online seller of health, auto, or home insurance.
Use HealthCare.gov . Create an account and apply for a health policy online on the official website of HealthCare.gov