- 1). Understand the purpose of insurance is to reduce financial risk. This means health insurance protects you from financial loss resulting from illness, life insurance protects your family from losing your income if you die and auto insurance restores your car and protects you from liability in the event of an accident.
- 2). Compile a list of insurance that you need: auto, home, life, pet, dental or health. Not everyone needs every type of insurance. If you have a car, contact the DMV or your financier regarding the minimum requirements you must have. Mortgage companies will have minimum requirements listed in the escrow documents. Some landlords require renters insurance. Other insurance policies are considered supplemental if a person wants to mitigate loss.
- 3). Gather historical information. Insurance premiums are based on your history. If you are good driver, you will get a discount. Younger and healthier individuals pay less premiums in health and life insurance. Homeowners with few past claims and security measures installed in the home get discounts as well.
- 4). Compare apples to apples. When looking at any insurance policy next to another, the bottom line isn't what the premium price is, the bottom line is the premium price based on the same parameters. For example, term life insurance does not accumulate cash value and will no longer pay a benefit after the term is complete. Comparing inexpensive term life insurance to a variable whole life policy is not comparing the same policy features.
- 5). Contact advisers you trust. Insurance salesman have a bad reputation of just trying to get someone into a policy to make a commission. If you are concerned about the terms of a policy, contact a tax adviser or a third-party financial adviser who can help you navigate what your real needs are and what policies will best suit you.
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