Some types of personal insurance, such as automobile liability insurance and, under the Affordable Care Act, health insurance, are required by law. Others, such as comprehensive and collision automobile insurance and homeowners insurance, can be required by lenders when property is used as loan collateral. The amount of insurance coverage available generally depends on how much the individual is willing to pay in premiums; the more someone is willing to pay, the more insurance they can obtain. However, individuals may be unable to purchase a policy for a particular risk if they pose too great of a risk to the insurance company. For example, someone with a history of cancer might not be able to purchase life insurance. In other cases, high-risk individuals can still purchase insurance, but will have to pay above-average premiums to compensate the insurer for the extra risk. An example is high-risk auto insurance for drivers who have been at fault in multiple accidents over a short time.
Personal lines won’t cover every risk an individual might face, but they can dramatically reduce the dollar amount of potential losses. Individuals can usually tailor each policy’s coverage and deductibles to strike the right balance between the amount of coverage and the cost of premiums