What is Insurance?

–       Insurance is a way to mitigate the impact of an unexpected financial loss. While one could image a ton of different scenarios where this would be a great tool to have, insurance only covers pure risk. In short, pure risk is any uncertain scenario where there is opportunity for a loss but no opportunity for any gain. If a person experiences a loss that is covered by insurance, then the insurance company providing the coverage will pay to indemnify the insured. In some situations there is a deductible the insured must pay before the insurance company will pay for damages incurred by the insured.

What happens if I don’t have insurance?

–       Let’s say person A does not have insurance and experiences a loss qualified as insurable. Person A would most likely be responsible for all of the financial cost. In a situation where another party’s negligence leads to person A’s damages and are found liable, then the other party’s insurance would be responsible for indemnifying person A. Now, let’s think of a nightmare where one party causes some insurable loss to another party, but neither party has insurance. In this situation the only way to recover damages would be through a mutual agreement or civil court.

How does insurance work?

–       There are four basic core components of insurance: Property Insurance, Casualty Insurance, Life Insurance, and Health Insurance. There are many different products of insurance, but here are a few products that are most common:

Ø  Car Insurance

Ø  Homeowner’s/Renters Insurance

Ø  Vision, Dental, and Health Insurance

Ø  Business Insurance

Ø  Term and Whole Life Insurance

–       To the point of insurance by definition, this is a two-party contract between an insurance company and the insured. In this arrangement, the insurance company will pay the costs to indemnify the insured in the event of a covered loss in exchange for a premium. Most insurance products have a duration of either six or 12 months. Life insurance products will have a duration of many years. Insurance coverage will begin at 12:01am on the effective date, and end at 12:01am on the expiration date.

How do I know what insurance I need?

–       There are many prompts for mitigating risk through insurance. In the case of life insurance for example, simply being alive is one. Let’s take a look at some reasons one may find themselves in the market shopping for insurance.

–       Car: In the case of car insurance, any vehicle with a valid registration must maintain continuous liability insurance as mandatory per state law. Car liability insurance is a means of financial responsibility such that a negligent party will have a minimum limit of monies available via insurance for bodily injury and property damages.

–       Home: If you are buying a home or a condo, or if you are leasing an apartment; this is a prompt to purchase homeowner’s insurance. Yes, we understand that there are different forms of dwellings, and that an apartment is not a “home”, but when it comes to insurance all of these types are covered through various homeowner’s (HO) policy forms.

–       Business: In most situations, a business will be required to carry various forms of insurance, such as: general liability insurance, commercial auto insurance, workers’ comp insurance, errors and omissions insurance, etc. just to name a few. Beyond being responsible regarding financial liability, most businesses are required to carry some form of insurance associated with business activities being conducted.

Where can I get insurance?

–       There are hundreds of different insurance companies. Most people only know of a few, which are the larger companies that market through commercial ads. There is not much difference across insurance companies beyond cost as they will all pay for legitimate claims. The difference may be that one company has some favorable characteristic like an online customer portal or outstanding customer service that may influence which carrier is chosen.

–       Pearson’s Insurance Agency is what is known as an insurance brokerage. Meaning that Pearson’s Insurance Agency has appointments with multiple insurance carriers. So, we have the ability to shop around in the insurance market for the best rate available for any combination of coverages. A broker is the alternative to what is known as a captive agent. A captive agent is only affiliated with one insurance company and its products. A captive insurance agent’s duty is to the insurance company, whereas, a broker’s allegiance is to the insured. So, it is better to work with an insurance brokerage, like Pearson’s Insurance Agency, to ensure that the insurance policy issued is comprehensive and all risks applicable are mitigated.