Buying Insurance For The First Time
The catch about purchasing insurance is that you are purchasing a product that you hope you will never have the need to use. However, if you do one day need to use your insurance policy, you will quickly understand why you need both the right amount and the right type of coverage.
Decide how much insurance you need.
You will not be able to stop accidents from happening, but you can protect your finances by purchasing an insurance policy. There are many factors that help determine how much coverage you need, including things like how much you owe and how much equity you have on your home, what the assets you own are worth, whether or not you have dependents, and how much out-of-pocket costs you can handle. Online calculators and worksheets are a good way to get a basic idea as to how much coverage you need, but sitting down with a broker or agent is the best way to completely evaluate your needs.
Comparison shop
Whether you are buying life, health, auto, homeowner's, or some other type of insurance, you will take the same steps when choosing your policy. First, you will need to decide on the type of insurance and the amount of coverage that you require. Then, you will want to contact insurance companies on the Internet, phone, or through a broker or agent in order to get quotes. You will want to get quotes from many different companies, since the amount of your premium can change significantly from company to company.
When comparing quotes, be sure to compare the coverage on the policy. One policy may be more affordable because it does not cover as many benefits. Also, look for a company with a good reputation, customer service, and claims-paying reputation. The major rating agencies, such as Standard & Poor's, Moody's, and A.M. Best rate all companies selling insurance, based on how well they are able to pay claims. These ratings can be found on the Internet, in insurance company literature, or through your public library.
Understand what you are buying
Your insurance policy represents a legal contract, and as such, it is often full of wording that is difficult to understand. You still need to read it before you sign it to find out what coverage you are purchasing. The policy will tell you things like:
- What people or items are covered
- Any exclusions or limitations that apply to coverage
- The beginning and ending of the coverage
- How much coverage you purchased
- How much the coverage costs (the premium)
- How to file a claim
If you do not understand something in the document, it is always important to ask an insurance professional to explain it to you.
Evaluate your insurance needs periodically
Your insurance needs will change, so you should check your insurance frequently, perhaps even annually, to see if you need to make any changes. Here are times when people commonly change their insurance policies:
- When they get married or divorced
- When they start a family
- When they rent an apartment
- When they buy a house, car, or other major purchase
- When a child goes to college
- When they start a new job or become self-employed
- When they are buying or selling a business
- When there is a significant change in income
- When they take on the responsibility of an aging parent
- When they retire
Reviewing your needs periodically is the best way to make sure that your insurance is working for you, not against you.
