Insurance is your protection against major financial setbacks, such as damage to property, medical expenses, a lawsuit, and loss of income. You don’t necessarily have to purchase insurance for everything you own, but it’s wise to cover your more costly possessions.

How does insurance work?

Insurance companies collect premiums, or payments, from customers (policyholders) on a regular basis. This money is pooled together, and when policyholders have accidents or experience damage to their insured property, they file claims with their insurance companies.  Then, the insurance companies examine the claims according to the terms and conditions of the policies and determine how much they will pay to offset the damages.

Common types of insurance

There are all types of insurance policies available to cover just about anything you own or any situation you need covered. These are the most common:

• Health/Medical ­ covers things such as doctor visits, medical tests, emergency care, surgery, long-term illness, and prescriptions. Most employers offer this to employees and their families. These plans often include disability, dental, and vision care insurance.
  
  Who needs it?  Everyone — especially those who lead an active lifestyle! Usually, you are covered by your parents’ health insurance policy until you are out of college or reach a certain age. Most state universities offer some form of health insurance coverage to students for a fee. 
  
  

• Life ­ covers funeral expenses and provides income for people who depend on you in the event of your death.
  
  Who needs it? Life insurance is not typically needed until you have a dependent or family that relies on your income. It’s a good idea to purchase life insurance when you get married, if you have a child, or if a family member becomes dependent on you for financial support.  
  
  

• Property - covers your place of residence from losses due to weather, fire, or theft. It also covers you in case someone gets hurt on your property and wants to sue you. Homeowners insurance is for the actual structure you live in (and its contents), while renter’s insurance only covers your personal belongings.
  
  Who needs it?  All homeowners and renters should have insurance. You are required to have homeowner’s insurance in order to purchase a home with a mortgage.
  
  

• Automobile ­ covers repairs for damages to another person’s car or your car as well as medical expenses for you, your passengers, or another driver involved in an accident, if the accident is your fault.
  
  Who needs it?  All car owners are required by law to have car insurance, even if the vehicle is not being used. All licensed drivers in a family household must be listed on the family insurance policy. And, if you regularly allow a friend to share or borrow your car, you must include that friend or family member on your policy.