What is Insurance? Types of Insurance, Benefits

Individuals face the risk of death, disability, or destruction of their property and lives. Financial losses may result from these risks. Purchasing insurance allows such risks to be transferre to an insurance company.

What is Insurance?

A policy of insurance is a contract between two parties, namely the insurance company (insurer) and the policyholder (insured). In this situation, the insurance company promises to make good the losses of the insured if the insured contingency occurs. Losses are caused by the insured contingency. The policyholder may die or their property may be damage or destroye. There is uncertainty surrounding the happening of the event, therefore it’s called a contingency. In return for the promise made by the insurer, the insured pays a premium.  

How does insurance work?

There is a legal contract between the insurer and the insured, known as an insurance policy. An insurance policy specifies the conditions and circumstances under which the insurance company will pay the insurance amount to either the insured person or their nominee. You can protect your family and yourself from financial hardship through insurance. Generally, the premium for a large insurance policy is much less in terms of money paid.

Since very few insured people actually use the insurance, the insurance company takes the risk of providing a high level of coverage for a small premium. That is why you are able to get insurance for a large sum at a low price. Insurance is available to anyone or any company, but it is up to the insurance company to determine whether to provide it. Upon reviewing the claim application, the insurance company will decide whether to provide coverage. High-risk applicants are generally denied coverage by insurance companies.  

What are the types of insurance available?

Generally, insurance can be divide into three categories.

Life insurance

Life insurance protects you against the loss of your life. A life insurance policy ensures that your dependents are financially protecte in the event of your untimely demise. This insurance is especially important if you are the only breadwinner for your family or if your family is heavily dependent on your income. In life insurance, the policyholder’s family is financially compensated if the policyholder passes away during the term of the policy.  

Health insurance

The primary purpose of buying health insurance is to cover the costs of treatment for illnesses and diseases. There are various types of health insurance policies. You can buy a generic policy as well as a policy for a specific disease.  Treatment, hospitalization, and medication costs are usually covere by health insurance premiums.  

Car insurance

In today’s world, car insurance is a policy every car owner should have. It protects you against untoward incidents, such as accidents. Some policies also compensate you for damage to your car during natural disasters, such as floods or earthquakes.   Additionally, it covers third-party liability, i.e. paying for damages to other vehicle owners.  

Education Insurance

The education insurance for children is similar to a life insurance policy that was specially designe as a savings tool. Education insurance can provide you with a lump sum amount of money. When your child reaches the age for higher education and enters college. The money can then be used to cover the higher education expenses of your child. Under this insurance, the child is the beneficiary of the funds, while the parent/legal guardian owns the policy.  With the Education Planning Calculator, you can estimate the amount of money required to fund your children’s higher education.  

Home insurance

All of us dream of owning our own homes. Having home insurance will help cover losses or damage caused by accidents like fire and other natural calamities and perils. Other instances covered by home insurance include lightning, earthquakes, etc.  

What are the tax benefits on insurance?

In addition to the safety and security benefits of buying insurance, you can also benefit from lower income taxes.

Conclusion

You can buy an insurance policy offline as well as online, whether it be life insurance, health insurance, or general insurance. There are insurance agents who can help you buy a policy, as well as websites where you can buy one. Be sure to research insurance policies before investing in one.  

Read More: Travel Insurance International , Travel Health Insurance USA , Best Travel Insurance for Europe

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