EXAMPLES OF INSURANCE

Some readers of this note may already have used insurance to reduce economic risk. In many places, to drive a car legally, you must have liability insurance, which will pay benefits to a person that you might injure or for property damage from a car accident. You may purchase collision insurance for your car, which will pay toward having your car repaired or replaced in case of an accident. You can also buy coverage that will pay for damage to your car from causes other than collision, for example, damage from hailstones or vandalism.

Insurance on your residence will pay toward repairing or replacing your home in case of damage from a covered peril. The contents of your house will also be covered in case of damage or theft. However, some perils may not be covered. For example, flood damage may not be covered if your house is in a floodplain.

At some point, you will probably consider the purchase of life insurance to provide your family with additional economic security should you die unexpectedly. Generally, life insurance provides for a fixed benefit at death. However, the benefit may vary over time. In addition, the length of the premium payment period and the period during which a death is eligible for a benefit may each vary. Many combinations and variations exist.