Manage Your Risk Through Insurance
Manage Your Risk Through Insurance
The easiest way to describe insurance is as a type of risk management that offers protection in the case of unanticipated circumstances such as death or disability, car accident or a burglary.
The company selling the insurance is known as the insurer, the person buying the insurance policy is known as the insured and the amount that you are charged for your insurance policy is called the premium.
Insurance can be defined as the act of incurring small expenses (in the form of your premiums) in exchange for coverage from the insurance company in the form of compensation in the event of a loss by the insured.
The way insurance companies operate can be explained by using the following example: If you have a group of 10 to 20 friends, each one can put a small contribution (in the form of money) in a piggy bank each month. If one of the friends is in an accident or robbed, the money in the piggy bank can be used to repair the car or replace the stolen items. Insurance companies have the advantage of receiving premiums from thousands of insured entities, enabling them to pay for losses or damages that only some of their clients will incur. The insurance piggy bank is therefore worth substantially more than the friends' piggy bank and funds can be pooled from there in order to process received claims.
Any risk that can be measured can potentially be insured. The different types of insurance include the following: Car insurance, home insurance, health insurance, accident, sickness and unemployment insurance, casualty insurance, life insurance, property, liability and credit insurance.
For the basic reason that there are so many different types of insurance available, insurance companies are also classified into two types: Life insurance companies and non-life insurance companies. Life insurance companies will typically sell life insurance, annuities and pension products while non-life insurance companies will sell the other types of insurance. Non-life insurance companies are also known as general or property/casualty insurance companies.
If you have a safety net in place by means of an insurance policy, does that mean you can through all caution to the wind and live a reckless life? The risk is with the insurer and not with you, the insured, so why be cautious? Unfortunately for you, insurance companies have considered this approach too and have certain clauses to protect themselves when their client turns out to be high-risk clients. For example, people with a high risk job or how engage in extreme sports may have to pay higher life insurance people than other clients. Young drivers with high performance cars will pay higher car insurance premiums than an older person with a family car. The list goes on and on.
Insurance policies can be quite confusing. Do not hesitate to call in the assistance of a broker, or to arrange a meeting with one of the insurance company's agents. There are a lot of qualified professionals available to assist the main on the street with choosing the correct insurance policy.
Not everything in life can be prevented - make sure that you are adequately insured!
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