What is insurance and why is it needed?
Insurance is a legal agreement between two parties – the insured and the insured. Insurance is a legal agreement between two parties such as an insurance company (insurer) and an individual (insured). In this, the insurance company promises to cover the loss of the insured in the event of an insured accident.
This is also known as insurance coverage or insurance policy. A person’s life and property are surrounded by the risk of death, disability, or destruction. These risks can lead to financial losses. Insurance is a wise way to transfer such risk to an insurance company.
Based on the insurance terms, the insurer pays a lump sum to the policyholder/nominee in case of any incident. A specific type of insurance policy chose based on personal needs and life goals.
An insurance policy has a variety of components, a strong understanding of which helps a lot in choosing the most suitable plan for your needs.
How does insurance work?
The insurer and the insured are legal insurance contracts, called insurance policies. The insurance policy contains details of the terms and conditions under which the insurance company will pay the sum insured to the insured or the nominees.
Insurance is a way to protect yourself and your family from financial loss. Insurance companies take this risk of paying a higher cover for a smaller premium because very few insured people claim insurance.
This is why you get insurance for a large sum at a lower price. Any person or company can seek insurance from the insurance company, but the decision to provide insurance is at the discretion of the insurance company. The insurance company will evaluate the claim application to make a decision. Typically, insurance companies refuse to provide insurance to high-risk applicants.
How many types of insurance:
Life insurance and general insurance are the two main types of insurance coverage. General insurance can further subdivide into different types of policies.
1) Life Insurance: You can take out life insurance to protect the family due to untimely death or death during the term of the policy. In case of the untimely death of the insured, it pays a lump sum to the family. This helps the grieving family to cope with the financial struggles that may occur in the absence of an earner.
2) General Insurance: Non-life insurance policies are considered general insurance policies which include insurance coverage for home, health insurance, auto insurance, education insurance, etc.
Below are some common types of insurance;
1) Health insurance: Health insurance is a contract for which an insurer has to pay some or all of the cost of a person’s healthcare in exchange for a premium.
2) Vehicle insurance: A car insurance policy covers the cost of damage to your car due to an accident or even theft. This can lead to actual damage to your vehicle. To reduce the cost of this unforeseen event, you need a kemper car insurance policy.
3) Travel Insurance: Travel insurance is coverage that is designed to protect you from the risks and financial losses that can occur while traveling. Risks range from minor complications such as missed airline connections and delayed luggage to more serious problems including injury or major illness.
4) Property insurance: Property insurance is insurance that protects the business or home’s physical goods and equipment against loss from theft, fire, and any other hazards. … Generally, property insurance covers the risk of all losses due to fire, theft, wind, smoke, snow, lightning, etc.
1) Provides protection: Insurance coverage minimizes the impact of losses that one carries in a hazardous situation. It provides financial compensation in times of financial crisis. This not only protects the insured from financial problems but also helps in examining the resulting stress.
2) Provides assurance: Insurance coverage gives policyholders a sense of reassurance. The insured pays a small portion of the income for this guarantee which will help in the future. Thus, there is a guarantee of handsome financial support as opposed to a premium. This will protect the policy buyer in the event of an accident, danger, or any vulnerability.
What are the primary benefits of an insurance policy?
– Perfect cover for your family after you leave
– Compensation benefits
– Financial support after retirement
– For specific purposes
– For stable business operation
What are the disadvantages of an insurance policy?
-Difficult Terms Document
-Long Legal Formalities