In ancient times, villagers use to collect some amount of money from each individual and keep it as a community resource to be used in the future. The modern insurance policy works the same way but is a little refined. More info here.
Insurance is a contract governed by some policies and conditions which benefit the holder in a difficult situation by reimbursement against losses from the company. The insurance company basically does risk management and uses the cash pool from the holder to manage losses and gain profit out of it and thus keeping the insurance affordable for each individual.
Different types of insurance exist to cover different types of risks, such as life, health, property, casualty, etc.
To be protected by insurance, the individual or entity must pay a premium, which is an ongoing charge. The premium is calculated based on the level of risk.
While insurance protects against loss, it does not guarantee that no loss will occur. It is crucial to select an insurance company that is financially stable and has a good reputation.
How Does Insurance Works?
As there is a huge variety of insurance. Individuals and Companies can very easily find one which wholeheartedly willing to insure them with a little cost. Some of the cost is generic but most of the time the insurance company quotes the price from individual to individual depending on the risk involving them. The most common types of personal insurance policies are auto, health, homeowners, and life. In the United States, vehicle insurance is mandatory so you must be owning insurance already if you own a legal vehicle in the USA.
Whereas businesses are insured by a special kind of policy that is very specific to their need. Some of them include Ransom, kidnapping, medical malpractice, and professional liability.
What is Premium in Insurance?
A premium is a policy cost expressed in terms of monthly cost which is calculated by the insurance company based on the profile you have and the risk involved around you.
For example, if you have certain high-end vehicles and have a bad driving record so here is the risk involved in your profile is too high and you may be charged more compared to someone who has a mid-range car and a neat driving record. Well, it all depends on all the insurance companies some charge more and some charge less for the same exact policy and profile. So to land the best insurance quote for you, you must do some research and brain labor.
What is Policy Limit in Insurance?
It is the maximum amount that the insurance company can pay when you apply for an insurance claim. It may be determined per period e.g annual/monthly or the entire insurance term. For general life insurance, the term is called Face value which is the maximum amount that the insurer will pay on the death of the insured.
What is Deductible in Insurance?
The deductible is a specific amount that the policyholder must pay out of pocket before the insurer pays a claim. Deductibles serve as deterrents to large volumes of small and insignificant claims.
Types Of Insurance
- Health Insurance
- Home Insurance
- Auto Insurance
- Life Insurance
- Travel Insurance
Insurance shall always be considered an investment instead of a liability. Life is full of uncertainties and to be insured is the least you can do to tackle a situation that may change your life forever.
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