What is Insurance and how does it work?

Insurance is a protection against risk. It is protection offered to an individual, a home, a business, goods, a vehicle against any uncertainty. For example, as an individual, you may be the head of the household upon whom all the members of your family depend emotionally and financially. What if something fatal happens to you? The emotional loss can never be compensated. But, it is possible to compensate for the financial loss.

If you have taken insurance for your life, then your family would receive benefits that would compensate for the loss of your life. Similarly, if you have a car and you meet with an accident, it would cost a big sum to repair the car. If you have insurance for your car, then the insurance provider would pay for the repair of the car.

Insurance thus protects an insured person and his property against financial losses.Some people use fake insurance id card to do fraud.You should avoid using them.

The Definition

Insurance is defined as a legal contract between two parties – the insured and the insurer, to make good any losses in case of an insurance contingency. In the case of the example of the car given above, the insured is the owner of the car, the insurer is the automobile insurance company and the contingency is damage to the car because of the accident.

What is Insurance

How does it work?

You can insure yourself (your life, your health, your family) or the property that belongs to you (home, vehicle, business) for a specified amount, that is called as the insured amount. In order to get coverage, you need a pay an amount to the insurance agency. This is called the premium. If anything happens to you or to the property insured, then the insured agency will pay you the insured amount.On this site we also share information on how to save money on insurance.

Types of Insurance

  1. Life insurance: Here, insurance is for your (of your family members) life. If you die, then your family members get death benefits wherein the entire amount insured is paid to them, irrespective of how much premium you have paid. If however, you survive for the duration or term of the policy, then most policies would allow you to claim the amount insured along with bonuses offered by the insurer.
  2. Health insurance: This is where you insure your health by having a health policy that would take care of the medical expenses if you are hospitalized for any pre-defined ailments. Most health insurance plans would provide a direct payout to the hospital.
  3. Vehicle insurance: This is mandatory in most places. You insure your vehicle against any damage caused by an accident. It can also cover payment to the owner of the other vehicle if the accident was caused by you.
  4. Home insurance: This is insurance for your home, taken to protect your home from fire or any natural disaster. The insurance provider would compensate you for any loss to your home.
  5. Car insurance- auto insurance is must have for your car. Know more about how to get car insurance.

You can find more information about insurance types on this post different types of insurance.

Insurance is very important to ensure that you and your property are financially protected against the uncertainties that life can throw up.

 

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