Role of Insurance in Personal Finance

Role of Insurance in Personal Finance

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Role of Insurance in Personal Finance

From my budget, it is evident that under my expenses, there is insurance premiums. My insurance premiums include life insurance, auto insurance, home insurance, health insurance and long-term care insurance. My current situation is that my income does not match my expenses and that I am almost running into debt. In my current situation, insurance plays a role in that in case of damages to my insured property, life and health, the insurer is responsible for payment as soon as I inform them of the same. This means that I do not have to spend extra money to attend to these issues. Having health insurance implies a cut down on the amount spent on direct out of pocket payments for my health, having a positive impact on my budget.

In my current situation, insurance plays a role in that they are my creditors as I owe them in terms of premiums and in terms of money I owe them, due to be paid. This means that I must allocate money in my budget to pay for my insurance premiums in order to benefit from the services of an insurer in case of damages. In case my financial situation worsens, I will have to file bankruptcy. If I file bankruptcy, if the insurer is a secured creditor, the insurer receives full payment to the extent of the value of property securing the debt. If unsecured, they will receive little or nothing because of their claims. The other role that insurers play in this situation is that they are a counterparty to a contract with me, the debtor. Upon filing bankruptcy, courts can enjoin insurance policy cancellations and there is no right to compel policy renewals.

In order to better protect myself and reduce my insurance costs, I would ensure that I pay all my insurance premiums on time so that I can always benefit from insurance when needed. This will ensure that I can get access to essential healthcare services when I need them and cannot afford to pay out of pocket. This also means that in case of unforeseen damages to insured property, the insurer pays for these damages on my behalf, and my financial situation remains stable and sustainable. To reduce my insurance costs, I would reconsider having auto insurance if I decided to sell my car and choose alternative means of transport available, such as taking the train. In addition to this, I would revisit my insurance provider and analyze available packages from other insurance providers. I would then choose the package that best suits my pocket and meets most of my needs.

References

Keown, A. J. (2013). Personal Finance: Turning Money into Wealth. Pearson Education Inc.