What is Insurance ?
Insurance is Contract With a insurance Company that Protect You and Your Loved ones from Financial Losses caused by disaster, Damge , Accident like events .
In Other Words , You buy insurance policy to protect your home , health and automobiles against financial loss.
Insurance is well known as a Policy that covers your financial loss by giving you an amount of payment by insurance company .
Key Takeaways of Insurance:
• Insurance company recover your Financial Losses caused by different circumstances like damage to your assets , injury or disasters.
•Key components of most insurance policies are deductibles , premium and policy benefits.
•Popular Insurance Policies include Life insurance, health insurance and automobile insurance.
• The National Association of Insurance Commissioners ( NAIC ) sets regulations and standards for insurance in United States.
Why Insurance is Important ?
Risk Management
Insurance helps managing risks by covering your financial losses caused by such as Injury , hospitalization , damge , accident and death.
Cover Financial Loss
Insurance policies covers financial loss and provide financial protection against unfortunate situations .
Financial Security
As it recover financial losses , it provides financial security to your family by covering the losses and allow them to live their in absence of their loved ones by financial recovery.
Investment and Saving
Financial policies offers both investment and saving opportunities.
Types of insurance
Genral insurance
It cover those financial losses which are occured by damage or loss of your assets.
Life insurance
Life insurance is bought for financial security against death or loss of life. It provides a payment to the family of a dead or on disability of policy holder.
There are two types of Life Insurance :
• Term Life Insurance : It is a life insurance policy for only a specific time like 10 - 20 years.
• Permanent Life Insurance : In this insurance policy there in no time limit or it Covers your life as long as you keep paying tghe insurance premium amount.
Health insurance
Health insurance provides coverage against illness or injury that occurs medical expenses. It covers hospitalization cost , medicine cost etc.
You can pay copays and coinsurance for health insurance which is fixed amount of a covered medical benefit.
Automobile insurance
It Provides Financial Coverage against your Vehicle's physical damage caused by accidents or other types of damages.
If you have expensive cars your insurance cost will be high.Plus , insurer checks your history of reckless Vehicle driving , which also cost higher insurance cost.
Home insurance
Home insurance covers Damage happened to your home .
Insurance policy components
When you understand how insurance policies works , it will help you in finding in buying best insurance policies according to your need.
There are three Policy Components :
1. Premium
2. Policy Limit
3. Deductibles
Insurance Premium
Insurance premium is an amount set by insurer you pay monthly for you future recovers paid by insurance company.
In other words we can say it's premium is price of insurance policies generally monthly cost paid by us to to insurer for future damage coverage.
•Life Insurance Premium : Age , gender , tobacco use and amount of coverage.
•Health Insurance Premium : Age , gender , health status and coverage levels.
•Auto Insurance Premium : Property and auto claims , age , location etc.
•Home Insurance Premium : Home's Value , Personal Belongings , locations and coverage amount.
Policy limits
The policy limit is the maximum amount paid by a insurer to cover a loss under a policy.We also can say that The Maximum Amount an insurer will pay for your damage , injury , health covered under a policy .
Maximum Limit can be set per damage , injury or over the life.
If You want Insurance coverage higher , you have to pay higher premium of a insurance policy. It can increase maximum limit of coverage.
Deductibles
Deductibles is an amount paid to insurer before claiming insurance policy coverage.
It is an amount you pay to insurer before claiming the policy benefit.
Deductibles are deterrent to large volume of small insurance claims.
Let's understand it with a example , suppose in a accident your car got a damage of 1000$ , then you pay a deductible of 500$ and rest amount is paid by the insurer.
Deductible depends on insurance policy and insurer and it can be applied per claim.
High deductible polices cost you less premium because you pay high deductible amount and the insure pay small amount , it means you pay less premium amount .
How insurance Works ?
There are many types of insurance policies are available in market and An individual or a company can insure themselves to insurance company.
General personal insurance policy types ate health , auto , life and homeowners insurance.Most individuals have at least one of these insurance policies.Automobile insurance is mandatory for all individuals who have at least a vehicle.
Business related insurance policies are bought for a specific field risks.
Medical/Health Insurance covers death or injury related liability claims.
If any damage occurs to an individual or a company, insurance company give some fixed compensation for the damage.
In insurance period you have to pay installments of money monthly or yearly, so you can get compensation in future.
There are insurance Policies available that inwedding kidnap , extortion , identity stolen , wedding etc.
Final Thoughts
There are many types of Insurance Policy. Before you buy an inssurance it is important you understand the basics of How insurance works. There are many types like Life , Health , Home , auto insurance available but buying an insurance depends on your financial conditions and requirement of which type of policy you need.
Do you take insurance of your life , automobile , health ? Answer is simple , yes.
You must insure your health , life , automobile etc. to protect or recover your financial loss and your family from Financial loss caust by an accident or disaster.
