NDSU Extension - Ramsey County


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Protection for Financial Loss

Protection for Financial Loss


            Purchasing insurance is one of the simplest ways families can protect themselves against the risk of financial loss caused by damaging or destructive events. Insurance helps to protect you by pooling your potential risks with others who are in similar risk situations.

            With insurance, you pay a small to moderate amount at regular intervals (called a premium) to an insurance company to cover your costs should the damaging effects of a large loss occur. In effect, you transfer some of your financial risk to the insurance company.

            Families commonly face personal, property, and liability risks.

            Personal risk is the loss of income (and increased expenses) resulting from unemployment, illness, disability or premature death.

            Property risk is the loss of personal property and real estate caused by fire, wind, accident, or theft.

            Liability risk involves loss because of neglect or carelessness that results in bodily injury or property damage to another person. For example, a person might fall on a broken step and break a leg.

            Insurance coverage is a basic part of overall financial planning. Plan to renew your policies over time as your needs change.  With so many variables in life, you can see how the amount and type of insurance needed changes over the years. Make sure to reevaluate your needs at least every 5 years or whenever your life has a major change such as a birth, marriage or death.

            Property and casualty insurance provides reimbursement coverage in the event of fire, theft, flood, or wind damage. This type of insurance allows us to make repairs and buy replacements that our financial assets wouldn’t typically cover. When purchasing property and casualty insurance, it is important to understand what will be covered by the insurance company, and what we must take care of ourselves. Homeowner’s policies cover

            • fire insurance on the house;

            • extended coverage for damage to the house by such things as wind, hail, falling objects, smoke, and motor vehicles;

            • allowance for additional living expenses if the homeowner has to live in a motel or rented            house while repairs are made;

            • allowance for personal property lost because of fire or theft;  this covers items such as clothing, books, cameras, stereos, and household furnishings; and  liability claims resulting from any injuries suffered by others while on your property.

            To get the most from the money you spend on household insurance, make an inventory of your household possessions. This will help you to determine how much coverage to buy, and it is useful in filing claims. Walk through each room and list – or photograph- personal possessions with a date of purchase and purchase price. This inventory should be as detailed as you can make it.  Once the inventory is complete, put a copy in a safe-deposit box or a fireproof container (not a metal box or filing cabinet).

            When selecting a household insurance, do the following:

            • Consider large deductibles to reduce premiums.

            • Compare costs and coverage from different companies.

            • Read the policy and know exactly what it covers and what to do if you have a loss.

            • Inform your insurance agent of additions to your house and major purchases so your insurance coverage can be kept up to date.

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