Short term or temporary insurance refers to various types of insurance policies except life insurance. These policies are short term in order to accommodate people’s changing insurance needs over time. Short term insurance involves an agreement between an insurer and a policy holder. The agreement is binding for a limited time or is flexible depending on the individual’s circumstances. Policyholders pay insurers a specific amount or premium at scheduled intervals. The premium amount is based on policyholders’ individual risk profile. For instance, if a car owner wants to insure a vehicle, insurers will consider factors such as the owner’s age, gender, driving record, driving experience, previous insurance claims and installed anti-theft devices. This is because the owner’s profile will determine the likelihood that the risk they are underwriting will actually occur. The greater the perceived risk, the higher the premium is.
There are several types of short-term insurance. Property insurance protects homeowners from damage caused by theft, fire or weather. It includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance and boiler insurance. Household insurance policies cover the contents of one’s home. Policyholders are paid the insured amount to replace household items, such as furniture, appliances and clothing, in the event of theft, natural disasters, impact, leaks and third party liability.
Car insurance comes in three types: third party cover, third party fire and theft cover, and comprehensive cover. Third party car insurance provides coverage when the policyholder causes damage to someone else’s property. Third party fire and theft insurance covers damage due to fire or theft, or damage to a third party’s property due to a car accident. Comprehensive car insurance covers the policyholder’s vehicle in cases of accidental damage, theft and hijacking, or damage done to a third party. Personal liability insurance provides coverage in the event of an accident that causes the death or injury of a third party.
Travel insurance is taken out by individuals traveling abroad to cover losses such as medical expenses, loss of personal belongings, travel delays, personal liabilities, etc. Travel insurance is ideal for graduating seniors trips, college students studying overseas, senior citizens over the age of 65 with or without Medicare traveling abroad, relatives visiting from overseas, families who sponsor exchange students, tourists, individual or group missionaries, and newly arrived immigrants.
Disability insurance provides financial compensation in the event that the insured is unable to work due to a disabling illness or injury. States such as California, New Jersey, New York, Hawaii and Rhode Island have sponsored short term disability insurance with low benefit amounts. Some employers also provide disability coverage.
Short term health insurance fills in gaps in coverage for a limited time, usually 6 to 11 months. It is ideal for people who are in between jobs; those waiting for another health insurance to kick in; college graduates coming off their parent’s health plan; or early retirees awaiting Medicare eligibility. Short term health insurance insures against unforeseen accidents or illnesses rather than provide comprehensive coverage. Thus, it does not cover physicals, preventive care, immunizations, dental or vision care and pre-existing medical conditions. Short-term health insurance policies have also become a last option for uninsured Americans outside of the Affordable Care Act’s open enrollment season. People must have some sort of major life event such as getting married, having a baby or filing for divorce to enroll in coverage on a state or the federal exchange outside of the open enrollment period. While these plans will not save policyholders from the tax penalty for failure to comply with the new health-care law, it can provide some financial relief when medical services are needed.