Introduction to Insurance

[0:00]Hey guys, I'm George Camel, Ramsey personality and personal finance expert. In case you haven't realized, insurance can be complicated. After all, we're talking about an industry that uses lingo like double indemnity death insurance and actuarial reserving methodology. Does your brain hurt? Well, I'm here to help it unhurt. So let's go over the basics and answer three important questions. Why do you need insurance in the first place? How does it work and what types of insurance do you need? Let's start with that first question. The reason you need insurance comes down to one word, risk. And no, not the kind of risk I took when I asked my wife out for our first date over Snapchat. That was just a mistake. We're talking about financial risk. Think medical bills from an emergency or the fallout from a major car accident. Now, those things may seem unlikely, but they can happen to us at any time. And if you don't have insurance in place, you'll have to foot the bill all by yourself. Have fun writing that $10,000 check after you tear your ACL playing pickleball. Or whatever fake sport is cool by the time you watch this. But when you do have insurance, you're protected financially from that kind of risk. And that's what insurance is all about. It's not a savings plan and it's not an investment. It's about transferring financial risk from you to an insurance company. You know what that protection gives you? Peace. It certainly helps me sleep better at night along with my weighted blanket and silk eye mask. And it's a game changer. Don't knock it till you try it. Love a weighted blanket. Next, let's talk about how insurance works. There are two key terms you need to know, premium and deductible. A premium is the amount of money you pay an insurance company, usually each month for coverage. A deductible is the amount you're on the hook for before the insurance provider steps in and starts paying on a claim. So let's look at an example. We'll say you have an auto insurance policy with a $200 monthly premium and a $2,000 deductible. That means you pay the insurance company $200 a month for coverage. Then if you get into an accident and file a claim with your insurance company, you would have to dish out $2,000 to cover your deductible before the insurance company jumps in to help pay for repairs or a replacement. Now, those are just the basics. Things can get a little more complicated, especially in the health insurance world. So if you want to dig deeper on that, check out the other videos on this channel. Now that leads us to our last question. What types of insurance do you need? Well, if you do a quick Google search, it won't take long to realize the insurance world is full of insurance. Seriously, there's a bajillion types and most of them are junk. So let me narrow it down to the eight that really matter. For starters, there's auto insurance, homeowners or renters insurance, health insurance, and long-term disability insurance. You need these no matter what stage of adulthood you're in. The next batch of insurance, I'm going to label if thens. If someone depends on your income, then you need term life insurance. If you're 60 or older, then you need long-term care insurance. And if your net worth is over half a million dollars, then you need an umbrella policy. And lastly, well, it's not technically an insurance product, I highly recommend getting identity theft protection that covers restoration services. So how do you make sure you have the coverage you need in all of those areas? Well, I'll make it easy for you. Click the link in the description to take our free coverage checkup. You just answer a few questions and we'll make sure you have all the right coverage and all the right places. So there you have it. Now you understand the basics of insurance, what it's for, how it works, and which kinds you need. And best of all, no pain to the brain, just like I promised. Now if you learned something from this video and even if you didn't, be a pal and hit the like button and subscribe to the channel for more helpful content.