Vital insurance policies you CANNOT ignore

Lynn Prins

Many people especially Kenyans, might think having insurance is excess baggage, a lot like when you carrying an umbrella with you all the time. But being prepared for the “rain” must bring some joy.

With that said, as a consumer do you actually understand the concept of having insurance policies? If you’re unsure with regards to how insurance policies work, then here’s what you should know:

Insurance policies are contract documents issued by an insurance company to an insured, to receive financial protection or reimbursement against losses from an insurance company. The company pools clients’ risks to make payments more affordable for the insured.

Now that we have explained what insurance policies are all about, you should understand that protecting your most important assets is an important step in creating a solid personal financial plan.

Listed below are essential insurance policies we should all have:

Get your family financially protected:

Planning for the future is a very daunting task for a lot of people, because it leads individuals to think of death. As daunting as it might be, it’s also good so you can be better informed.

Getting a life insurance policy means it protects the people that are financially dependent on you. If your parents, spouse, children or other loved ones would face financial hardship if you died, life insurance should be high on your list of required insurance policies.

Think about how much you earn each year (and the number of years you plan to remain employed), and purchase a policy that will replace that income in the event of your untimely demise. Factor in the cost of burial, too, as the unexpected cost is a burden for many families.

Don’t rely on hope to protect your future earnings:

The prospect of long-term disability is so frightening that some people simply choose to ignore it. While we all hope that, “nothing will happen to me,” relying on hope to protect your future earning power is simply not a good idea. Instead, choose a disability policy that provides enough coverage to enable you to continue your current lifestyle, even if you can no longer continue working.

Long term disability insurance is an insurance policy that protects an employee from loss of income in the event that he or she is unable to work due to illness, injury, or accident for a long period of time. Keep in mind that it does not provide insurance for work related accidents or injuries that are covered by workers’ compensation insurance.

Homeowners insurance could be the best thing you’ve ever bought:

Replacing your home is an expensive proposition, but having the right homeowners insurance can make the process less difficult. When shopping for a policy, look for one that covers replacement of the structure and the contents in addition to the cost of living somewhere else while your home is repaired.

Also remember that the cost of rebuilding doesn’t need to include the cost of the land, since you already own it. Depending on the age of your home, and the amenities that it contains, the cost to replace it could be more or less than the price you paid for it. Be sure that the policy provides suitable coverage for the cost of any liability for injuries that might occur on your property.

Before we move on, you should also understand the difference between homeowners insurance, mortgage insurance, and property insurance:

Homeowner’s insurance provides coverage for damage to your property, like when your deranged cat accidentally knocks over a candle and sets the house on fire. It will also protect against things like theft and vandalism.

Whilst private mortgage insurance (PMI) protects your mortgage lender in the event you default on your loan. Lenders typically require you to carry PMI if they deem you to be a high-risk borrower. Thus, homeowner’s insurance protects you, the homeowner, while mortgage insurance protects the lender.

Property insurance is a first-party coverage. In other words, in an insurance contract the first party is the insured and the second party is the insurance company. If there is a loss on a first party coverage, the insured gets reimbursed.

Your health doesn’t come cheap… get an affordable health insurance:
The soaring cost of medical care is reason enough to make health insurance a necessity. Even a simple visit to the family doctor can result in a hefty bill. More serious injuries that result in a hospital stay, can generate a bill that tops the price of a one-week stay at a luxury resort. Injuries that require surgery can quickly rack up five-figure costs. Although the ever-increasing cost of health insurance is a financial burden, for just about everyone, the potential cost of not having coverage is much higher.

Get your car insured… by law it’s the right thing to do:

In Kenya and most other places, car insurance is required by law, making it illegal to own or drive a vehicle without being insured. But getting your car insured shouldn’t depend on whether it’s a requirement by law or not, this is one lawful document not to ignore.

If you are involved in an accident, and someone is injured or their property damaged, you could be subject to a lawsuit that could possibly cost you everything you own. Accidents happen quickly and the results are often tragic. Having no automobile insurance or purchasing only the minimum required coverage save you only a tiny amount of money, and puts everything else that you own at risk.

Remember when shopping for insurance policies shop carefully, read the policies and talk to an agent to be sure you understand the coverage and cost. Make sure the policies that you purchase are adequate for your needs, and don’t go into an agreement until you are happy with the purchase.

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