Everything you need to know about insurance basics, like coverage types, limits, cost and more.
Why Do You Need Insurance?
Whether it’s car, home, health or life, it’s probably safe to say that you have insurance in some shape or form. Maybe it was required, like when you bought your home or car. Or maybe you have insurance because it provides peace of mind, knowing you’re financially protected from the unexpected — or maybe both!
Whatever your reason, insurance is an important part of sound financial planning. And it’s a small price to pay for the protection you get.
Why Is Insurance Required?
Insurance is a way of transferring risks. For example, if you make a big purchase, like a new car or home, and you take out a loan or mortgage, your lender wants to be sure that your vehicle or home is financially protected from potential damage. How do they make sure of this? They protect their investment by requiring you to purchase insurance. So you put the cost of a potential loss into the hands of an insurance company in exchange for your premium, and they’ll invest your funds and pay out if you file a claim — subject to the terms and conditions of your policy.
Let’s talk about car insurance for a minute. Almost every single state requires you to carry at least a minimum amount of liability insurance. Why? Well, with millions of vehicles out on the road, accidents are bound to happen. And the truth is a lot of people aren’t able to pay for the expensive damages.
States started mandating liability car insurance, which is what helps pay for damages caused by a driver to other people or property. This is so those affected won’t suffer financially as a result of an at-fault driver not being able to pay them for the losses that occurred. And, to make sure you’re properly protected from the unexpected, you might even want to consider uninsured or underinsured motorist coverage, considering many drivers meet the bare minimum liability requirements in their state (or maybe don’t have insurance at all) and therefore might not be able to pay you if the damages incurred exceed their limits.
Insurance is a way to help not only you but those around you. Sure, you pay a fee to your insurance company and may never have to file a claim, but if you the unexpected does occur, you’ll be glad you don’t have to pay entirely out of pocket.
What Can Insurance Protect You From?
Insurance is designed to financially protect you and provide you the comfort of knowing you and your family have something to fall back on in case you face a loss. And while you may only buy insurance because you’re required to have it, insurance can be a necessity for other reasons, too.
Here are some scenarios:
If someone in your family passes away, life insurance can help maintain your current standard of living. It could help pay for things like your mortgage, household bills, credit card bills, childcare, college tuition and even final expenses, like funeral costs.
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Let’s say you get into a fender bender. While those don’t tend to be the most expensive car repairs, a thousand-dollar bill could set back your savings. Thankfully you’re a smart, proactive planner who knows the importance of having insurance, which can cover the cost of repairs and even set you up with a rental while your car is in the shop.
Learn More About Auto Insurance >
A strong wind could knock a tree over onto your roof, causing shingle damage. Roof repair can be expensive, but having home insurance means you’re financially protected from the sudden expense. While things like Mother Nature are out of your control, you’ll be glad you have insurance protecting you and your investments.
Learn More About Homeowners Insurance >
Just because you’re renting doesn’t mean you shouldn’t protect your belongings with insurance. Your landlord’s insurance only covers the building you live in, not what’s inside your apartment. Renters insurance can help replace your belongings if anything unexpected happens — like fire, theft, water damage and more. Your renters policy also provides you with liability coverage if you accidentally cause damage to the building or injury to a guest or another tenant.
Learn More About Renters Insurance >
While your homeowners and auto insurance policies carry some liability coverage in the event you’re sued for an accident, these coverage limits may not be enough to protect your finances from legal expenses and settlement payouts. Umbrella insurance can help in the event you’re found at-fault for an accident by providing funds to cover your legal costs and up to your coverage limit in a settlement.
Learn More About Umbrella Insurance >
Protecting your business from taking a financial hit due to a loss can be as simple as getting business insurance. A business insurance policy can help cover things like the costs of property damage, loss of income from having to temporarily close due to a covered event and liability coverage for your employees.
Learn More About Business Insurance >
Farm and Ranch Insurance
Your farm or ranch means a lot to you and your family. If your barn is damaged in a storm or someone is injured on the job, farm and ranch insurance can help cover those costs.
Learn More About Farm and Ranch Insurance >
American Family Can Help With Your Insurance Needs
We understand that insurance can be complicated, confusing and sometimes even frustrating. But knowing the importance of having it will hopefully give you some confidence and trust in your decision to purchase insurance
If you have more questions or you’re interested in getting coverage, connect with an American Family Insurance agent — they’re always ready to help explain your options to make sure you’re properly protected.
Related Topics: Insurance Needs , Insurance Terms