If you are reading this article that means you wanted to know about what insurance is and how it works. Well you are in the right place, because here in this article I am going to share with you the basics of insurance such as what is insurance, how it works, and insurance types and benefits.
Insurance is the most important thing in everyone’s life. There are different types of insurance policies provided by different insurance companies. If you are interested to read more about insurance, below is the full article on insurance types and benefits and how it works.
Insurance is a contract in which you will pay an amount to the insurance company. The amount you pay can be annually, half-yearly, quarterly or monthly. But why do you give this amount? Well, you give this amount to get the financial protection against something that is unplanned or unpredictable. The basic formula of insurance is that if something unpredictable happens to you then you will get the financial protection from the insurance company.
How it works
The contract that you made with the insurance company is called policy. In this policy there are two things one is premium and the other is cover. Premium is the amount to be paid in the contract of insurance it could be annually, half-yearly, quarterly or monthly.
It is the amount you give to get the financial protection that the insurance company promises you. Cover means the amount of risk that is covered. It means to what limit or what amount you get the financial protection.
For example, let’s assume if you take coverage of 4lakhs then you have to pay the premium of 15000 per year. It depends on what type of insurance you are buying.
Why people don’t buy insurance?
First of all most of the people don’t want to pay for something that they don’t want to happen. And the second thing is paying such small amount for big cover sounds fake to them.
Here is how the insurance companies actually work.
The insurance company pools the risks of its customers in an insurance contract and decide the affordable premium. This is why premium changes and the amount you pay for covering the financial protection varies according to you age and medical conditions. Insurance plans are used to safeguard the customers from financial losses.
Types of insurance
There are many different types of insurance. Below are the five main types of insurance.
Life insurance: Life insurance means you pay the premium ( fixed amount) to the insurance company at an appropriate age for a term or duration. It means the amount which you pay will be given to the nominee in the event of death of the insured. It is important to have life insurance because it provides financial protection to your loved ones in you absence.
Health insurance: Health diseases and the costs for treatments are increasing these days. It is a benefit to have health insurance. There are many types of health insurance policies. It is important to have health insurance to protect yourself and your loved ones from health diseases and financial crisis during medical emergencies. In the health insurance you will get the amount to pay for the costs of medical treatments.
Motor insurance: Motor insurance is nothing but vehicle insurance also known as auto insurance. It is important to have vehicle insurance because road accidents are increasing day by day. It provides protection against losses that occur during accidents or any damages. Auto insurance has different types. The premium in auto insurance varies to males, females and teenagers because according to insurance company stats males drive faster and more miles than females.
Travel insurance: Travel insurance is for the people who travel a lot. If you don’t travel then it might be not necessary for you. Travel insurance varies for each individual needs. In some cases travel insurance cover comes with credit card travel benefits.
Home insurance: Home insurance is the most valuable product to have because our property is exposed to various risks such as theft, damages and natural disasters. Home insurance provides protection against losses that occurred to your home or property due to natural disasters. Home insurance may vary depending on every individual need.
Benefits of Insurance Coverage
An insurance policy comes with multiple benefits and help people in various ways. Below are some of the important benefits of insurance.
- Insurance provides security to the customers because the customers pay small amount of money to the company. The insurance company provides financial protection to their customers in the event of any damage or losses that occurred.
- Insurance coverage protects the customer from financial crisis and offers monetary compensation. It reduces the impact of loss in risky conditions.
- Insurance company pools the risk of the customer, calculates the amount of insurance coverage and decide the affordable premium to be paid. The amount is paid to the customer who suffered the loss.
- One of the most important benefits of the insurance is buying the right type of insurance because it protects from the losses that may occur in future. It is a best way to get protection against losses.
Insurance is the valuable product to have because there are many different benefits of having insurance. It is a contract between two parties: you and the insurance company. The insurance company provides financial protection in the event of something unpredictable happens.
Insurance company pools the risks of a certain group they make by calculating the amount to be paid and then decide the affordable premium. In this article we have shared what is insurance, how it works, insurance types and benefits. Hope you liked this article.