Insurance 101
Understanding insurance is a cornerstone of financial literacy. It’s how families protect what matters most — income, health, and long-term financial security.
What Is Insurance?
Insurance is a financial tool that transfers the risk of major financial losses from you to an insurance provider. You pay a small, predictable amount called a premium, and in exchange, the insurer covers large, unexpected events such as:
- medical emergencies
- property damage or theft
- loss of income due to disability or death
- accidents or liability claims
This concept — risk pooling — is at the core of how insurance works and is outlined by regulatory bodies such as the National Association of Insurance Commissioners (NAIC).
Source: NAIC – Consumer Insurance 101
Why Insurance Matters
At V & V Advisors, we teach families that insurance is not just a product — it’s a financial safety net that protects your long-term goals. Without insurance, a single unexpected event can undo years of savings, investments, or progress.
- Protects your income — the foundation of your financial plan
- Prevents debt caused by medical or home emergencies
- Safeguards family stability during illness, accidents, or loss
- Builds resilience so long-term goals (like retirement) stay on track
CFPB research consistently shows that financial shocks — job loss, medical bills, or property damage — are leading causes of financial instability. Insurance reduces the impact of these shocks.
Core Types of Insurance
These are the four major insurance types most families interact with. Each protects a different part of your financial life.
| Type | What It Covers |
|---|---|
| Life Insurance | Provides financial support to your family if you pass away, helping replace income, pay debts, or fund future goals. |
| Health Insurance | Reduces the cost of medical care and protects against large hospital or treatment bills. |
| Homeowners / Renters | Covers property damage, personal belongings, and personal liability. |
| Auto Insurance | Covers vehicle damage, theft, and liability if you're responsible for an accident. |
Choosing the Right Policy
Selecting insurance should be intentional. A good policy doesn’t just fit your budget — it fits your goals, your risks, and your stage of life.
- Understand coverage — what’s included or excluded
- Compare premiums vs. deductibles (low premium = high deductible)
- Check company ratings from AM Best, NAIC, or state regulators
- Review claims reputation — how they support families during hard times
CFPB and NAIC both emphasize reviewing disclosures carefully and working with licensed agents who act in your best interest — a core principle we uphold at V & V Advisors.
Learn More
These independent, trusted sources provide unbiased guidance to help consumers make informed insurance decisions.