Understanding Insurance Basics

Buying Insurance

Make sure you get the right insurance to meet your needs, which may change over time. Evaluate your situation from time to time, as you may need to update your policy after major life events such as:

• starting a family
• buying a home
• starting a business
• buying a new vehicle.

Your decisions about the type and amount of insurance you get will depend on your situation, your budget, your personal beliefs and the value of what you are insuring.

Know what insurance coverage you already have so that you do not buy unnecessary coverage. For example, your employer's benefits plan may offer supplementary health coverage, or travel health insurance may be included if you pay for your trip with a credit card.

When buying insurance:

• Evaluate your situation to determine what risks you may need to insure against. You may also wish to have an emergency savings fund to protect you against some of the smaller financial risks.
  
  
• Check with your employer to see whether you already have certain types of insurance under your employer's plan
  
  
• Shop around and compare both the coverage and the prices. Some policies may be cheaper but may not offer the same level of service or coverage.
  
  
• Be sure to get enough insurance. If you make a claim, your insurer will only pay up to the maximum amount insured by your policy. When deciding how much insurance you might need, consider the value of the item you are insuring and the full financial impact of paying for the loss or event you are insuring against.
  
  
• For those types of insurance that have a deductible, such as home and auto insurance, determine how much of a deductible you can pay if you need to make a claim. Generally, a higher deductible will reduce your premiums, but you will need to pay the full amount of the deductible if you make a claim.
  
  
• Before signing, read the policy carefully. Make sure you understand what is and is not covered by your policy.