Insurance Literacy for Students: The Role of Insurance in Comprehensive Money Management
Financial literacy for students is a subject matter that needs to be taken seriously in this time of high cost of living to safeguard their financial future. It is easier to spend without having enough knowledge of how to save, invest and multiply money. In that view, understanding the importance of insurance and the role of insurance in money management will enable them to secure a prosperous path ahead.
Hence, we’ll be exploring some of the important details as it relates to insurance. Let’s get started.
What Is Insurance Planning?
First of all, let’s take each word – insurance and planning – separately.
What then is insurance?
It’s simply an arrangement whereby a company undertakes to provide compensation for a specific loss, damage, illness, or death in return for payment usually by premium rate.
Planning has to do with preparation ahead of something, an arrangement because of the future. It also means creating a situation or a forward-thinking approach to something.
Bringing both definitions into one, we can define insurance planning as the process of carefully selecting the insurance providers that will protect one from unexpected events or financial losses.
Some examples of insurance include life, mortgage, vehicle, and health insurance. Insurance is of different types. Hence, in planning, you should examine closely their insurance policies, coverage limit, premiums and deductibles to see the ones that you consider most vital and beneficial for you.
Having explained that, let’s proceed to explore what personal insurance planning is.
Personal Insurance Planning
Personal insurance refers to insurance purchased for family needs or personal purposes, other than insurance for business interest or property. It refers to insurance of human life values against the risks of death, injury, illness etc.
Personal insurance planning, therefore, implies planning insurance for personal purposes and knowing your needs are perfectly insured allowing individuals to focus on other goals and aspirations without constant worries.
At this point, let’s go a bit further into the topic area of this article.
Insurance in Financial Planning Explained
Jacob Kujala, Bancorp Investments’ (an affiliate of U.S. Bank) wealth management insurance strategist, stated in the quote below:
“Your insurance policies are unique and very individualized to your situation. Your estate plan, your legacy and your wishes after you’re gone must be taken into consideration.”
In other words, the quote above implies that if a good financial plan would take consideration of income, investments, goals and various concerns, and is continually monitored, insurance plans as well should follow a similar pattern.
Financial planning involves minimizing spending on damages and losses, saving up costs and maximizing earnings as much as possible and a well-aligned insurance plan will provide individuals against unforeseen setbacks.
Right now, let’s explore the importance of insurance in money management.
Why Insurance Is Important In Money Management
Students need to understand the cycle of how money works. Basic practical understanding and discipline to save, invest and multiply money must be comprehended if students would rise above the poverty level to the financial limelight. Top assignment writing services have received topics in this regard too. It’s important to note that not all institutions teach students to understand financial literacy.
Insurance is therefore one of the ways to save for the future. Health insurance, for instance, helps to cover medical expenses for students in safeguarding student life without worrying about the cost. It has been proven over time to be a good method of building strong financial support for young ones.
So, we will explore in detail how insurance reduces financial risk and helps with money management.
How Insurance Reduces Financial Risk and Helps With Money Management
Think of yourself driving your car and you hit a wall, and scrape your car. If you have invested in the right insurance plan, the insurance company will bear the cost of the damages. However, there’s usually a portion for you to pay. Although, you can be sure you’d not have to bear the full cost.
Depending on the insurance policy that guides the insurance you’re opting in for you will be helped out with the repairing damages or losses having deducted from your payment portion.
The insurance policy states the pattern of insurance coverage and the damages to be repaired in case of any incidence. Hence, it is important to go through it before choosing the package you’re subscribing to, as the insurance company pays only for things stated in their policy.
Let’s now go on to understand how insurance policies work.
How Insurance Policies Work To Protect Against Unexpected Financial Losses
Insurance policies are set for a specific period. Often called policy terms, they are renewable upon expiration. There are various insurance types and some allow you to choose a beneficiary, which receives the payment or benefit from the policy you opt in for.
When you purchase any policy of your choice, you pay an amount called the premium. Some are paid monthly, and some are paid just once in bulk. Besides this payment, in the case of damage or loss, subscribers also pay a fee named deductible. This refers to the amount of loss calculated to be borne by the subscriber before the share of the insurance company is borne.
For example, if you subscribe to a vehicle insurance policy with a $5,000 deductible fee, in addition to your premium, where there’s a damage or loss of $20,000, you’d have to pay a $5,000 deductible before the remaining $15,000 is borne by the insurance company.
However, in some policies, you’re at liberty to choose your deductible. The greater your premium, the lesser your deductible and vice versa.
Common types of insurance include:
Health Insurance
This type of insurance covers medical expenses and drug prescription fees.
Life Insurance
The life insurance pays the beneficiary selected at the occurrence of the death of the insured.
Disability Insurance
This insurance pays the insured in the event of illness or injury that disables them and makes it difficult for them to earn a living.
Auto Insurance
With this insurance, you won’t bear the full cost of your vehicle repairs and medical expenses in the event of a collision or damage in an accident.
Homeowner or Renter’s Insurance
This type of insurance takes care of home and personal items that could be affected in cases of loss or theft. It sorts payment for repairs and replacement depending on the insurance policy.
With a strategic insurance plan making informed decisions in buying beneficial insurance policies is possible. Therefore, it is important to carry out adequate research about the insurance company you want to choose. You could make comparisons or call on an expert. This will help to discover the factors you should consider that’ll help you take the best insurance policy at the best price, thus making the best financial decision.
In conclusion
This article has covered information students should know as regards insurance in financial planning and incorporating that into your financial plans will help protect your health, education and ambition. Also, you learn about how insurance policies work. Therefore, with this information at your fingertips, you can proceed to venture into insurance as a means to manage money and protect yourself from financial losses.
