What is insurance?
Methods of transferring and distributing risk has existed as early as the 3rd and 2nd millennia BC, and in this modern era, we call them by the term of “Insurance”. What does “Insurance” exactly mean?
Insurance is an agreement between two parties – an insurance company (the insurer) and an individual (the insured). In this contract, the individual pay money to the company and when something unpleasant happens to the insured including serious sickness, injuries, stolen or damaged properties and so on, he or she will receive financial protection or reimbursement against losses.
- How does insurance work?
Once an agreement is reached between the two parties, there will be a legal contract of insurance – the insurance policy, informing both the insurer and the insured details about in which conditions and situation the guaranteed financial protection or reimbursement can be provided.
Believe this or not, the premium for a big insurance cover is always lower than the money paid to the insurer, and many insurance companies offer “ideal” contracts because they know that a number of their customers won’t claim their insurance later. This is the reason why we get so much in return for so little.
However, getting insurance is a good way to protect yourself as well as your family and properties from any kind of loss, so this method has been applied in numerous countries, by a huge figure of citizens, especially those having lots of assets.
Anyone can seek insurance and choose one insurer, but the insurer has the right whether to provide the insurance cover or not, and high – risk applicants are generally more likely to be refused than the low – risk ones
- What types of insurance are compulsory?
As a citizen, you may be in need of different insurance types but these four below are the most highly – recommended ones.
- Health insurance: This insurance is no doubt one of the most essential types as having a good health allows you to work, study and do anything you want to. Nonetheless, our physical health doesn’t always stay that good, and not everyone has the ability to cover the expense of treatment as well as medical services they receive without a health insurance. Purchasing a health insurance would be cheaper for an employee than a freelancer. Moreover, between two people of a married couple is an employee, the wife or the husband and their children can also get this insurance policy under one of the employers’ plans. Nevertheless, a freelancer can search for different offers from many trustworthy organizations and pick one that is suitable for them.
- Life insurance: There are two options for you when purchasing this type – the life insurance which lasts for 5 to 30 years and the permanent insurance – which lasts from the point of purchasing to the rest of your life. Having a life insurance can gain you a variety of benefits including replacing lost income, paying off debts and for married couples, this type can pay your children’s education fees. It’s highly encouraged to own a life insurance but do consider your financial conditions before purchasing as the 5 to 30 years lasting insurance is less expensive and more flexible.
- Property insurance: This type of insurance is quite similar to the life insurance with two choices – the home-owners insurance and the renters insurance. These are mandatory for almost every citizen because a house may be the biggest asset one has. Therefore, it is advisable to protect your house properly. However, this type of insurance won’t take power in the event of floods or earthquakes. If you are renting, do purchase the renters insurance to get financial backup in case of burglaries, natural disasters or any other emergencies. Both of these insurance kinds will also protect you from the situation of someone being injured at your home (which is also known as Personal Liability).
- Auto insurance: This insurance policy is required by law and in the USA, it is compulsory for you to have basic auto insurance covering liability. The most common reason for this is to cover the cost when replacing or repairing an expensive asset such as an automobile. In addition, the auto insurance policy is beneficial in other cases. Specifically, some auto insurance policies not only cover the medical cost if somebody get injured in an incident which you are responsible for but also the cost of legal defense. Like any other policy, the more money you pay to the insurer, the higher your premium cover becomes and vice versa, the less your input is, the less financial backup you are provided.
These fore-mentioned insurance policies are the must-have to each citizen. In case you are looking for any types of insurance, make sure you have got these 4 types and look up information carefully before signing any contracts or purchasing an insurance.