How do insurance policies work and what aspects should be considered before purchasing one?

Insurance policies are legal contracts between an insured (the person who purchases insurance) and an insurance company. These policies set out the terms and conditions under which the insurance company will provide coverage and benefits should an insured event occur, such as an accident, illness, property damage, etc. Here I explain how insurance policies work and what aspects you should consider before hiring one:

Cousin:

It is the cost that the insured pays periodically (monthly, quarterly, annually) to the insurance company in exchange for coverage. The premium may vary depending on factors such as age, medical history, type of coverage and level of risk.

Deductible:

It is the amount that the insured must pay out of their own pocket before the insurance company begins to cover the expenses. Generally, the higher the deductible, the lower the premium.

Coverage:

Defines the specific events and situations that are covered by the policy. It is important to understand what is included and excluded in coverage so you know what types of events will benefit from insurance protection.

Coverage Limit:

It is the maximum amount that the insurance company will pay in the event of a claim. If the costs exceed this limit, the insured must pay the difference.

Conditions and Exclusions:

Insurance policies include conditions and exclusions that detail specific situations in which coverage will not apply. It is vital to understand these conditions to avoid unpleasant surprises when you need to file a claim.

Waiting period:

Some insurance has a waiting period before coverage takes effect. This prevents people from purchasing insurance only when they already know they will need a claim.

Renewal:

Most policies are renewable, but it is important to understand the renewal conditions. Premiums can increase over time, and some companies may refuse to renew the policy after a certain age or based on claims history.

Claims:

If an insured event occurs, the insured must file a claim with the insurance company. The company will evaluate the claim according to the terms of the policy and will pay the corresponding amount if the claim is valid.

Policy Comparison:

Before purchasing a policy, it is essential to compare the available options. Compare premiums, deductibles, coverage limits and terms at multiple companies to find the best deal.

Professional advice:

Consulting with a financial advisor or insurance expert can be helpful to better understand your needs and the options available.

In short, before taking out an insurance policy, you should clearly understand the terms and conditions, evaluate your needs and risks, compare options and make an informed decision that suits your individual circumstances.