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Necessary Insurance

Updated on January 5, 2008

Will you get hit by a car or win the lottery tomorrow? Who knows. Nobody can predict the future, but everybody can buy some piece of mind by getting a little insurance. Here are 5 types of insurance everybody should have so they can sleep at night.

Explanation of common terms

1. Health Insurance

43 million Americans don't have it but you should. With medical costs increasing much faster than inflation (with no end in sight) medical insurance is becoming more and more important. A trip to the emergency for a broken arm cost me over $2500 before it was perfectly healed (Darn you Jack Daniels) and some medical treatments can cost thousands if not tens of thousands each year.

Most people who have insurance get it though their employers, but an individual can purchase it outright, or buy supplemental insurance. Monthly premiums vary by care level, age and other factors and can easily range from $100 per month for minimal care for a healthy 20 something; to $1500 per month for great care for a senior citizen.

2. Life insurance

This is really only for the parents in the audience. It's pretty simple; whoever is going to take care of junior in the event that you pass away is going to have a big burden. Why not make sure they have a big pile of money to help with the coming challenges?

Special provisions may apply, such as a suicide clause where the policy doesn't pay out in the event that the insured commits suicid. Any misrepresentations by the insured on the application is also grounds for nullification.

The face amount on the policy is the initial amount that the policy will pay at the death of the insured although the actual death benefit can provide for more or less than the face amount. The policy matures when the insured dies or reaches a specified age (such as 100 years old).

Upon death, the insurer requires proof of death before it pays the claim. The normal minimum proof required is a death certificate and a completed claim form that is signed notarized.If the insured's death is suspicious and the policy amount is large, the insurer may investigate the circumstances surrounding the death before deciding whether it will pay the claim. Proceeds from the policy may be paid as a lump sum or as an annuity.

Hilarious phone call

3. Car insurance

If you own a car this is a must. Literally. Many states legally require drivers to have a minimal level of insurance to operate a vehicle. How many times a week to you get up to 70 mph on the highway? One false move by you or some other bum could ruin your car and you body.

From fender benders, to high speed crashes, to theft, most car insurance companies will let let you customize the kind of insurance you want so that it fits your lifestyle. You will get to select from about a 10 different kinds of insurance, such as theft, uninsured driver, collision, liability etc. You also get to select how much coverage you want. For example if you have great faith in your driving skills, or you don't drive much you can take less liability insurance and pay a lower premium. Also if you don't live in the best neighborhood or drive through a lower income area often you can buy greater uninsured driver coverage.

The car insurance video above will provide you with no useful information whatsoever, but it is pretty hilarious. I wouldn't want to the the insurance agent on this call!

4. Property Insurance

At first I was going to write Homeowners insurance but I thought I would expand the category to property. Pretty much anywhere you go your propterty is in danger of succumbing to natural disasters: Fires and earthquakes in California, Tornadoes and floods in the Midwest, Hurricanes in the Southeast. A lot of things could happen to your most prized material possesions, so keep them safe with some property insurance.

Property is insured in two main ways - open perils and name perils. Open perils cover all the causes of loss not specifically excluded in the policy. Common exclusions on open peril policies include damage resulting from earthquakes, floods, nuclear incidents, acts of terrorism and war. Named perils require the actual cause of loss to be listed in the policy for insurance to be provided. The more common named perils include such damage causing events as fire, lightning, explosion and theft.

5. Casualty Insurance

Separate from (and sometimes supplemental to) medical insurance; this form of insurance protects you from some of the most hair-raising disasters. Get hit by a car? Fall off a ladder and break your back? Meet Rosie O'Donnell in person and instantly go blind? If you have Casualty insurance you will have a little help recovering and leading a normal life after your accident.

The video on the right is CNN coverage of a man who probably wishes he had gotten some casualty insurance before he decided to cross the street one night.


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