Insurance Basics

Overview:

In Module 7, we delved into understanding taxes and their implications for personal finances. Now, in Module 8, we will explore the basics of insurance and its role in protecting against financial risks. Insurance provides financial security and peace of mind by transferring the risk of loss from individuals to insurance companies. In this module, we will cover different types of insurance, the importance of insurance coverage, and strategies for selecting appropriate insurance policies, with examples from recent news.

Learning Objectives:

• Understand the concept of insurance and its importance in managing financial risks.
• Learn about different types of insurance and their coverage.
• Gain insights into strategies for selecting suitable insurance policies to meet individual needs.

What is Insurance?

Insurance is a contract between an individual or business and an insurance company, wherein the insurer agrees to provide financial protection against specified risks in exchange for premium payments. Types of insurance include life insurance, health insurance, auto insurance, homeowners’ insurance, and more.

Types of Insurance

• Life insurance: Provides a death benefit to beneficiaries in the event of the insured’s death, helping to replace lost income and cover expenses.
• Health insurance: Covers medical expenses, including doctor visits, hospital stays, prescription drugs, and preventive care.
• Auto insurance: Protects against financial losses resulting from accidents, theft, or damage to vehicles.
• Homeowners insurance: Provides coverage for damage or loss to a home and its contents due to perils such as fire, theft, or natural disasters.

Importance of Insurance Coverage

• Insurance provides financial protection and peace of mind by mitigating the financial impact of unforeseen events and risks.
• Adequate insurance coverage helps individuals and families recover from losses and maintain financial stability during difficult times.

Strategies for Selecting Insurance Policies

• Assess your individual needs: Consider factors such as age, health status, lifestyle, and financial obligations when determining insurance needs.
• Compare coverage options: Research different insurance policies, providers, and coverage levels to find the most suitable options at affordable rates.
• Review policy terms and conditions: Understand the coverage limits, deductibles, exclusions, and premiums associated with insurance policies before making a purchase.

Key Takeaways:

Insurance provides financial protection against specified risks by transferring the risk of loss from individuals to insurance companies.

Different types of insurance, such as life, health, auto, and homeowners’ insurance, offer coverage for various risks and perils.

Selecting appropriate insurance policies requires assessing individual needs, comparing coverage options, and understanding policy terms and conditions to ensure adequate protection at affordable rates.

Next Steps:

In Module 9, we will explore the basics of budgeting for emergencies and strategies for handling financial emergencies effectively. Stay tuned for Module 9: Financial Emergency Preparedness with The House of Emmanuels Foundation.

Author,
Ogbeni Ridwan (Lawyer; Banker; IT Audit Manager)
Director, The House of Emmanuels Foundation
Raleigh, NC USA