What, Why, and How of Insurance Policies


Insurance is a finance product. It is used as a hedge against risks of various kinds. You can insure health, life, vehicle, home, debts, and a lot more.

The price you pay for the protection is called premium. The insurer calculates the premium according to risk involved. The company promises to pay a sum if a devastating loss occurs.

How Do Insurers Work

Insurers make revenue by two methods:

– By collecting premiums
– By investing premiums

Insurers can give away insured sums because not every asset they insure is lost. That is, if they pay for a few dozen dozens, they will collect premiums for thousands of assets.

For example, if 1000 persons buy an insurance policy, not everyone will die in the same year. There may be a handful of deaths. However, the premiums collected from the 1000 persons ensure excess cash flow. The company can still make a profit.

They also invest the sum in appropriate investment vehicles. They invest in businesses, government bonds or interest-earning deposits.

What Is Underwriting?

Underwriting is the most complicated part of insurance business. The insurer has to assess the risk. The likelihood of a loss is calculated based on statistics and data. It is a research-based process. With underwriting the insurer or company wants to ensure a profit after giving away all possible claims.

Who Needs Insurance?

Almost everyone needs insurance. However, if you have no dependants, you don’t need a life-insurance. However, you might still need to insure your vehicle, home and health. If something happens, your insurer can pick the tab.

What Types Of Insurance Policies Are Available?

You can insure the following:

– Life
– Health
– Automobiles
– Valuables
– House
– Loans

In case you lose your health or suffer some disability due to some accident, the insurer can pay you the insured sum. Similarly, if you die, your dependents get the insured sum. Same is the case with loan insurance. Your dependents will be exempted from paying the remaining amounts on the mortgage or other loans. Property insurance protects against the risks of wind, cyclone, floods, fire and others.

The insured persons have some hedge against financial liabilities of all kinds. That is the advantage of getting insured. You have to pay a small price in the form of premiums. However, it is a very small loss considering the protection got against serious financial liabilities.

The Role Of Insurance Advisers

Advisers suggest you policies suited for your specific requirements. They assess your risks and suggest you policies best suited to hedge against all possible risks.

How To Get Insured

It is a financial decision. Assess your financial situation. Then identify the policies that will protect you the best way. Then identify the companies that offer the lowest possible premium to protect against any serious financial liabilities.

To know more about the basics concerning a home insurance policy, you may visit the provided link. For frequent travelers, it is important to know about the various available travel insurance policies to cover for their travel related expenses.

Article Source: http://EzineArticles.com/?expert=Alen_Cauller

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