How Personal Insurance Can Save Your Family from Financial Distress

Personal InsuranceMost reasonably healthy young to middle-aged people tend to think that they do not need to worry about personal insurance, but there are some very compelling reasons why getting adequate coverage is important for you and your family.

The premiums you pay regularly for personal insurance help fund your policy and enable your insurance company to provide you with financial protection in case of a claim. Your premiums alone do not ensure your coverage. Your insurance company gathers money from all of its policyholders and uses it for standard operating costs, dividends to stockholders and financial investments. The vast majority of this money is left over, and it becomes available to you or any client who incurs a loss that is covered by their personal insurance policy.

Personal insurance is a broad category. It actually has several subcategories which include life insurance, income protection insurance and total and permanent disability insurance.

Life insurance is one of the most common types of personal insurance available to you. It covers the financial loss that is associated with the sudden death of a family member, especially if they are a wage earner. When an income earner dies, the monetary impact can be devastating to the surviving members of the family, especially if the family has been living paycheck to paycheck. The death benefits of life insurance can prevent undue financial hardship for your family, or they can at least substantially minimize the impact. They can also help cover or defray any major medical costs or funeral expenses associated with the death of the policyholder, provide the funds necessary for the education of surviving children and pay any taxes or debts owed by the deceased that remain to be settled.

Income protection insurance is similar to life insurance in that payment is received when a breadwinner is no longer able to provide income. The difference between the two is that for income protection insurance, you do not need to die to receive benefits; you must be severely ill or disabled and not able to work for a time. Rather than paying a single lump sum, income protection insurance pays regularly throughout the period of illness or disability to enable you to continue to meet any financial commitments such as house payments, school tuition and grocery bills.

Your total and permanent disability insurance policy differs from an income protection plan in that you receive a single lump sum payment in the event that you suffer an injury or illness that renders you unable to work for the rest of your life.

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