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What Is Insurance, Its Types & Why Is It So Important?
Introduction
Insurance is a means of protection from financial loss. it is a form of price management primarily used to hedge against the risk of contingent or uncertain losses. insurance is a contract represented by a policy in which an individual or entity receives financial protection or reimbursement against losses from an insurance company.
The company pulls clients’ risk to make payments more affordable for the insured. an entirety that provides insurance is known as an insurer. an insurance company an insurance carrier or an underwriter a person or entity who buys insurance is known as a policyholder, while a person or entity covered under the policy is called and insured.
Policyholder and insured are often used but are not necessarily synonyms as coverage can sometimes extend to additional insureds. Who did not buy the insurance, the insurance transaction involves the policyholder assuming a guaranteed, known and a relatively small loss in the form of payment to the insurer to exchange for the insurer’s promise to compensate the insured in the event of a covered loss.
The laws may or may not be financial but they must be reducible to financial terms and usually involves something in which the insured has an insurable interest established by ownership position or pre-existing relationship.
Types Of Insurance
1. Life insurance or personal insurance
2. Property insurance
3. Marine insurance
4. Fire insurance
5. Liability insurance
6. Guarantee insurance
Insurance is categorized based on risk type and hazards.
What Insurance Will I Need?
Insurance is a mechanism of sharing losses of a few by many which reduce the cost of loss cost by a variety of risks. Insurance is a mechanism that helps to reduce the effects of adverse situations. It promises to pay the beneficiary of an asset a certain sum if a loss occurs. The various types of insurance are:
Life Insurance
It is a contract between an insured and an insurer where the insurer promises to pay the nominee of the insured a sum in exchange for a premium upon the death of the insured person.
Life insurance policy ensures that if an individual dies his or her family will be compensated by the insured amount. They secure the individual’s family’s future even when they are not around to take care of them.
Health Insurance
health insurance covers the cost of an insured individual’s medical and surgical expenses. There are various clauses like the number of days to be hospitalized, the list of illnesses covered, etc. Which need to be kept in mind before you purchase health insurance.
Travel Insurance
Travel insurance is meant to cover medical expenses and other losses incurred while traveling within the country or internationally. Travel insurance can also cover theft or loss of your luggage during travel.
Home Insurance
Our house and other household assets are costly assets and hence must be given utmost protection. home insurance covers building insurance contents like furniture insurance or both. It generally covers for damage caused by fire, bad weather, natural disaster, damage caused by burglary or attempted burglary.
Motor Insurance
Motor or auto insurance protects a vehicle against financial loss and liability that could result as a part of an accident or theft. The owner of a motor vehicle is legally liable for any injury or damage to third-party life or property arising out of the use of the vehicle in a public place. Hence third-party liability insurance of every vehicle is compulsory on the law and driving a motor vehicle without insurance is a punishable offense.
Conclusion
Now let’s answer these questions to find out if you learn well about insurance or not.
1. Mary fell ill while she and her family were traveling to Paris for their vacation. she had to be given medicines and the family had to be a huge sum of money for her medication. they could have been compensated this amount. had they taken which insurance?
2. There was a theft at John’s house and he lost a few very valuable items. However, he was compensated the amount as he had taken insurance for the same. what insurance had John taken?
3. while driving on the crowded roads of Bangalore a truck hit David scar from the back. there was a big dent and the garage estimated the expenses to be ten thousand rupees David asked the garage to go ahead and repair his vehicle as David would be compensated for his loss. he had taken which insurance to be getting these benefits?
4. Ravi met with an accident and expired. his family could not get further income and had to repay the home loan and also needed money for future expenses. they got a large amount of money from the insurance company which helped them sail through. what insurance had Ravi taken?
5. Jina fell ill and when her family took her to the doctor the doctor said she had to be hospitalized for a few days. the medical expenses of a few days in the hospital were very high. Jina recovered soon and came back home but the family had a huge medical bill to repay and had to borrow money from some relatives for the same. which type of insurance could have avoided this type of borrowing?
So, tell us your thoughts and same experiences! Do you know any other useful things about insurance? Share them with us in the comments below.
FAQs
1. What is insurance and its importance?
Insurance gives you financial support and decreases uncertainties in business and human life. It gives you safety and security against special events. Insurance gives a cover against any sudden failure. For example, in the case of life insurance financial service is provided to the family of the insured on his death.
2. What are the principles of insurance?
In the insurance world, six basic principles must be met, which means insurable interest, Utmost good faith, proximate cause, indemnity, subrogation, and contribution. The right to insure arises out of a financial relationship, between the insured to the insured and is legally acknowledged.
3. How many kinds of insurance are there?
There are, 4 types of insurance that most financial professionals recommend we all have: life, health, auto, and long-term disability.
4. What type of insurance is most important?
Health insurance is arguably the most significant kind of insurance. A 2016 Kaiser Family Foundation/New York Times survey discovered that 1 in 5 people with medical bills filed for bankruptcy. With a saying like this, funding in health insurance can assist you to control a significant financial difficulty.
5. Why should I get insurance?
Health insurance to cover medical expenses for you, as well as your spouse or children if you have them. Life insurance to provide for you and your family or cover your debts after your death.
6. How insurance can help me?
General insurance covers you and your assets from the financial threat of something going wrong. It cannot stop something from happening, but if something unforeseen does happen that is protected by your policy it means you will not have to pay the full price of a loss.
7. What happens if you don’t have insurance?
Without health insurance protection, a severe misfortune or a health issue that results in emergency care or a costly treatment can result in insufficient credit or even bankruptcy.
8. Is driving without insurance illegal?
You can’t drive or allow somebody else to drive a car or licensed trailer on a public street unless there is insurance for third-party risk, i.e. third-party insurance that will protect damages to somebody else or someone else’s belongings.
9. Why is health insurance so expensive?
The expense of medical care is the single biggest aspect behind U.S. healthcare expenses, accounting for 90% of spending. These prices reflect the expense of caring for those with chronic or long-term medical requirements, an aging population, and the raised cost of new medicines, methods, and technologies.
