Insurance!
The third step in protecting what you own is understanding what insurance is and which types will best serve you and your family. As was mentioned before Insurance is a form of shared risk. This means that instead of you taking all of the risk on by yourself, you have someone to count on. So what is insurance?
Insurance: This is when a company agrees to pay for the cost of damage and loss and in return you pay a monthly premium (your monthly payment).
As we mentioned in Risk you have to weigh the Cost Versus Benefit of having insurance. Today you can get insurance on just about everything, even Clown Insurance! Sometimes one of the benefits of working somewhere is that they will help provide health insurance, which is a huge monthly cost. Here are some other important words when talking about insurance:
Premium: This is the amount you are required to pay for insurance.
Deductible: This is where you agree to pay a certain amount before insurance will cover you. People do this in order to reduce their premiums. (Say you just bought a new boat and want insurance on it but you don't think anything bad will really happen to it. You could choose to have a $1000 deductible, which would greatly reduce your monthly payments. If your boat blows up you still have the insurance to cover it but you take on the risk of paying more of your own money).
Claim: This is a formal request for insurance to cover a cost covered by your plan. (If you should get in an accident you will want to contact your insurance agent to report).
Knowing these words will help you understand the world of insurance. Here are four major types of insurance that most people are familiar with:
Health Insurance: This is a type of insurance that covers costs related to medical needs and emergencies.
Life Insurance: This is a type of insurance that provides money for those who depend on the insured person. (In the case where a person dies early on and leaves behind a family that depends on them, this money can be used to cover their costs for monthly expenses, college, special events and other things they would have help provide).
Beneficiary: The person who the insurance holder wants to receive the money.
Homeowners Insurance: This is a type of insurance that covers cost associated with damages to your home. Renters insurance is similar, except that it covers cost for the place you are renting.
Car Insurance: This is a type of insurance that covers cost related to car accidents and other damage to your car. There are three major types of car insurance:
Liability Insurance: This car insurance covers the debt that a person would owe for damage to a person's property or injuries they received in an accident caused by them.
Collision Insurance: This car insurance will cover the cost of repair or replacement if a car is in an accident with another vehicle or object.
Comprehensive Insurance: This car insurance will covers damages other than a collision and even if a person's car is stolen.
In the process of protecting your Financial Freedom Insurance is a tool that will help you manage the risks. Next, we are going to look at Scams and Schemes and how they are trying to steal our money.