Insurance All The Basics

Insurance All The Basics



Insurance All the​ Basics
What is​ insurance?
Insurance is​ a​ means of​ providing protection against financial loss in​ a​ great variety of​ situations. it​ is​ a​ contract in​ which one party agrees to​ pay for another party’s financial loss resulting from a​ specified event.
Insurance works on​ the​ principal of​ sharing losses. if​ you​ wish to​ be insured,​ against any type of​ loss,​ agree to​ make regular payments,​ called premiums,​ to​ an insurance company. in​ return,​ the​ company gives you​ a​ contract,​ the​ insurance policy. the​ company promises to​ pay a​ certain sum of​ money for the​ type of​ loss stated in​ the​ policy.
History
Insurance is​ thousands of​ years old. the​ Code of​ Hammurabi,​ a​ collection of​ Babylonian laws of​ 1700BC,​ is​ believed to​ be the​ first form of​ credit insurance. a​ borrower did not have to​ repay a​ loan if​ personal misfortune made it​ impossible to​ do so. Insurance as​ we know it​ today can be traced to​ the​ Great Fire of​ London in​ 1666,​ which devoured 13,​200 houses. in​ the​ aftermath of​ this disaster,​ Nicholas Barbon opened an office to​ insure buildings.
Types of​ Insurance
Insurance generally covers situations involving pure risk that is,​ situations in​ which only losses can occur. Such situations include fire,​ floods and accidents. People also buy insurance to​ cover unusual types of​ financial losses like,​ a​ dancer might insure her legs against injury. There are mainly three types of​ insurance policies sold
1. Life Insurance
A life insurance policy provides that the​ insurance company will pay a​ certain amount when the​ person dies. This may be paid in​ a​ lump sum or​ in​ installments to​ the​ beneficiary [people named by the​ policyholder to​ receive the​ death benefit]. Some types of​ life insurance policies also enable policyholders to​ save money. Such policies have a​ cash value. a​ policyholder may borrow money against the​ cash value or​ surrender the​ policy for its cash value.
Annuities
These are savings plans sold by insurance companies to​ provide a​ fixed and regular retirement income. if​ the​ annuitant [owner of​ the​ annuity] dies before receiving the​ guaranteed number of​ payments,​ the​ insurance company must continue the​ payments to​ the​ beneficiary.
Dividends
Some insurance policies refund part of​ the​ premiums in​ the​ form of​ dividends. Such policies are called participating policies. An insurance company pays dividends if​ the​ money it​ collected in​ premiums exceeds the​ amount needed to​ pay benefits and administrative costs. Dividends may also include a​ share of​ the​ profits the​ company earned on​ investments made with premium funds. Dividends are most commonly paid on​ life insurance.
2. Private Health Insurance
Health insurance pays all or​ part of​ the​ cost of​ hospitalization,​ surgery,​ laboratory tests,​ medicines,​ and other medical care. the​ rising cost of​ medical care has increased the​ need for adequate health insurance. you​ could suffer a​ major financial hardship without such coverage,​ especially in​ case of​ a​ serious illness or​ accident.
Dental insurance is​ one of​ the​ fastestgrowing types of​ health insurance. it​ helps pay for a​ wide variety of​ dental services.
3. Property & Liability Insurance
Individuals and businesses buy property and liability insurance to​ protect their assets against financial loss. Property insurance provides direct compensation if​ a​ policyholder’s possessions are damaged,​ destroyed,​ or​ lost as​ a​ result of​ perils. Liability insurance protects individuals and businesses against possible financial losses if​ their actions result in​ bodily injury to​ others or​ in​ harm to​ property owned by others.
The main types of​ individual coverage are
• Homeowners Insurance
This provides protection against losses from damages to​ an owner’s home and its contents.
• Automobile Insurance
This is​ the​ most widely purchased and most important kinds of​ insurance. Drivers are legally responsible for any costs arising from accidents they cause. This insurance protects a​ policyholder against financial losses from accidents.
Financial viability of​ Insurance Companies
Financial stability and strength of​ the​ insurance company should be a​ major consideration when purchasing an insurance contract. An insurance premium paid currently provides coverage for losses that might arise many years in​ the​ future. For that reason,​ the​ viability of​ the​ insurance carrier is​ very important. in​ recent years,​ a​ number of​ insurance companies have become insolvent,​ leaving their policyholders with no coverage or​ coverage only from a​ governmentbacked insurance pool with less attractive payouts for losses.
How Insurance is​ Sold
Most insurance companies sell policies through agents. Exclusive agents are employees of​ an insurance company who sell only that company’s policies. Independent agents sell policies for several companies.




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