Insurance. We hate it. People have even compared it to the protection racket–you give the company your money and it (hopefully) takes care of you when you need it. Basically, the purpose of all insurance is to protect yourself or your family against the financial impact of a tragedy. Insurance is not to help you budget moderate-sized expenses, but to protect you against the truly catastrophic.

There are two ways to buy insurance. One way is to go to an agent to whom you explain your situation and trust him/her to suggest the insurance that is right for you. The other is do it on your own. You research the various types of policies available, decide what you need, and then comparison shop among the various companies. The advantage of going to an agent is that an honest and competent one can review your situation and make suggestions. The advantage of going on your own is that you usually pay less for the same amount of insurance.

STEPS FOR BUYING INSURANCE

Use these three steps when buying insurance:

Step One: Do I need this type of insurance at all? Figure out what the type of insurance you are considering covers and decide whether you need it.

Step Two: How much of this type of insurance do I need? Policies vary in how much they cover.Some cover specific dollar amounts. Others cover percent of loss. Some have a deductible.Others exclude certain types of damage. Look at these differences among policies and decide which one is for you.

Step Three: Where will I buy it? If you are working on your own, the web has a host ofservices to help you comparison shop among companies. Type in “insurance” on most search engines and you will come up with a number of sites. If you are working with an agent, you maybe working with a captive agent which means (s)he can only sell you policies form one company or an independent agent which represents several.

When selecting a company, consider also whether the company is both able and willing to pay on claims should you make one.. AM Best and other companies rate the financial solvency of insurance companies. The web comparison shopping services usually include and explain the ratings. You can also ask the company itself or your agent. Consider also the company’s record for trying to refuse to pay claims. Your state insurance commission may have a record of complaints. When buying any insurance, you will most likely save money if you pay annually or semi-annually. Sometimes buying several types of insurance from the same company will save you money. Often taking steps to make claims more unlikely, such as installing deadbolt locks or taking a safe driving course will lower your premiums.

When shopping for insurance, also look into group policies offered by alumni associations, professional associations, or religious bodies. Usually you can forget about specialized insurance advertised on television with paid endorsers. They usually cover very little.

Insurance is a complex subject. Do your own research or work with your agent. Hopefully this introduction will help you do that more effectively.