How does insurance work?

It's kind of complicated.

So, maybe you kind of think of insurance as a fairy godmother that’s there to wave a magic wand and fix problems. And then you might wonder, “Hey, there’s a hurricane coming through my area. Can I insure my house for just until the storm passes to get the claim covered?”

The easy answer is probably not.

“But why?” you complain.

Because it doesn’t exactly work like that.

So how does insurance work?

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Insurance, as a concept, is a way to share risk throughout a group of people instead of just one person who’s affected. Everyone pools their money together (in the form of premiums), and then one entity (the insurance company) uses that money to help pay for repairs if a person in the pool has an issue. It’s a way for people to protect themselves by sharing risk. For the system to work, the people paying premium have to be contributing kind of equally to the pool.

That’s why you might see things like waiting periods before a policy takes effect. (For example, flood insurance policies often come with waiting periods.) And that’s part of why you might not be able to get home insurance before a hurricane – binding restrictions happen a lot of the time before hurricanes hit.

Hurricanes aside, you could get an insurance policy only to cancel it a little while later, but that comes with a lot of paperwork.

Instead, you can:

  1. Take a look at your existing, long-term policies to see what they cover and how.
  2. Research coverage for your particular situation, whether it’s coverage for a quick drive, coverage for a vacant house, whatever. Chances are, there are coverages you can add on for not a lot.
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And if you’re worried about the cost, don’t be. Our agents are pretty great at finding cheap rates. Just LiveChat us and see for yourself!

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