Having insurance is a way to have financial planning. But what if you don’t have the budget to get an expensive plan? Would it be all right to get cheap insurance in the long run? In this article, we’ll talk about how you can gain with insurance.
Having insurance is managing risks. When an accident happens, risks can be minimal if you have insurance. However, insurance is similar to gambling. You make payments to have a bigger payout as time goes by. The only difference between gambling and insurance is that gamblers have a bigger risk when spending more money, while with insurance, you have to reduce risks so your current money will not get deductions.
Common Types of Insurance
The common types of insurance are:
- Life insurance
- Home insurance
- Car insurance
- Health insurance
- Travel insurance
Why Do We Need Insurance?
Depending on your insurance it can:
- Help you in your mortgage
- Afford repairs for your car
- Maintain your standard cost of living
- Help pay your hospital bill
- Gives financial security for your family
- Set up a business
Reasons to Buy Insurance
These are some main reasons why you buy insurance.
- The first is protection against a disaster. Catastrophes like flood, fire, tornadoes cannot be prevented and we want to make sure our possessions or properties are protected if this happens.
- Protecting something of high value. You protect possessions or items that could not be easily replaced. This is also applicable to you, if you’ve purchased life insurance.
- It will give you financial protection if you are sued.
- A specific occasion or event. This can be also considered as additional riders or coverage that is not included in the normal policy.
- Lastly, the most important part, acquiring more money than what you initially spent.
What Can You Do With the Money After You Get It?
The money you would get from premiums can be used in the following:
- Kept as extra money for emergency purposes.
- Utilized as investments to gain more profit.
- Used as set deposits to banks to gain more money.
- Used for other expenses such as welfare, rent and supplies.
Cheap Is Different From Affordable.
A lot of people look for insurance that are cheap. However, cheaper is not necessarily better. For example, you have a car and you decided to get cheap auto insurance and get into an accident, you’ll find out that it offers very minimal coverage. It is best if you find something that’s affordable by adding extra money with the cheaper one but you’ll be assured that it will give you the protection you need in case something bad happens.
It is still better to compare rates first instead of picking the cheapest solution. Always remember that the rates are always associated with what services and coverage you will receive.
What Can Happen If You Choose the Cheapest One?
- As mentioned earlier, you can have insufficient coverage. Getting the cheapest option may give you a higher risk when an accident occurs.
- The cheapest policies often have high deductibles but lower premiums. Even though accidents are not common, you may still be involved in on. If that happens, would you still be able to pay for losses? It is recommended to stay within your budget and choose a deductible that is realistic when an accident happens. Your earnings and assets may be at risk.
- Having the cheapest one may lead you to having inefficient customer service or claims support. They’ll take their time in processing your requests or do not handle your claims as efficiently as possible.
Insurers are the ones that decide what to charge for every client. They gather specific data in making your premiums. They also need to give a breakdown of the coverage they will offer. Once they have a contract set up, they will have to explain to you what will happen and provide their terms and conditions.
Please take note that premiums may change over time and not all risks are considered the same. Factors such as inflation, investment returns or your current individual risk may be reasons for the change.
Insurance can be pricey if you choose the wrong options or if you have too much of it. Always try to make sure it meets your needs. It’s not wrong to buy cheap insurance but make sure it’s worth it in the long run.