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What is insurance?

Insurance is any kind of program that allows people to protect themselves from major disasters by combining their risks with other people's and paying into a pool, which will pay out money if you experience a specific kind of adversity like illness, injury, death, or car damage.

Being insured allows you to transfer the risk of a catastrophic financial loss to the insurance company. And if you don't have a policy when you need one, it could mean big trouble. The nature of insurance means you can't decide to get it once the disaster occurs and you find yourself uninsured. You should get all your policies in place while things are going swell and you're still insurable in the eyes of the insurer.

How do I get insurance?

Insurance can be obtained from different sources. In some cases, you can get insurance coverage through an employer. Employers commonly offer health insurance, and sometimes life insurance and disability insurance, as a workplace benefit. When you obtain insurance through an employer, you may have a choice of one or more plans that your employer has pre-selected and your employer may pay some or all of the premiums for your coverage. 

You could also apply for insurance through individual insurance companies, or through insurance marketplaces or exchanges where you can compare prices from multiple insurance providers. 

When you apply for insurance, you'll need to specify who you want the policy to cover. For example, you may decide to cover your entire family under the same health insurance policy -- or you may get coverage for yourself and your kids through your workplace policy while your spouse gets coverage through his or her own employer. For some types of insurance, such as auto insurance, you may need to cover everyone in your household who will drive your vehicle to ensure comprehensive protection. 

Some kinds of insurance, such as life insurance, require you to select a beneficiary who will receive the payout in the event of your death. This is different from choosing who is covered under the policy. With a life insurance policy, your life can be the covered life, but your beneficiary will receive the death benefit payout when you die. 

Unfortunately, there are times when you may apply for insurance and find out you are not eligible for it. For example, someone with a terminal illness may not be eligible for life insurance coverage from most insurers. If you cannot get the coverage you need, try shopping around with different insurance companies, but know that it isn't always possible to find someone who will cover you. 

Laws on who can be denied coverage -- and the process for shopping for coverage -- can differ dramatically depending on what kinds of insurance you're looking for.