What is insurance? what are the different types of insurances?
Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for payment. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. An insurer, or insurance carrier, is a company selling the insurance; the insured, or policyholder, is the person or entity buying the insurance policy. The amount of money to be charged for a certain amount of insurance coverage is called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.
The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer’s promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated.
Insurance is for the protection of the unknown.
*Life Insurance is to provide for loved ones if the breadwinner dies.
*Health Insurance helps pay for covered medical treatments.
*Disability Income Insurance provides an income, should the insured get hurt or sick and can’t work.
*Dental Insurance helps pay for dental work, cleanings, etc.
*Eye Care Insurance helps pay for eye exams and glasses.
*Auto Insurance pays for damages to another person’s property, bodily injury, or to repair the insured’s vehicle, if Physical Damage coverage is on the policy. It also pays for medical payments for passengers.
*Homeowner’s Insurance pays for covered losses from, wind, hail, falling objects, vandalism, malicious mischief, and other covered losses, including personal liability, and medical payments to others.
*Umbrella Policy covers liability claims over and above the coverage on the insured’s auto and homeowner’s policy.
*Commercial Insurance covers businesses losses.
*Boat Insurance is for boats, and the liability thereof.
*Recreational vehicle Insurance covers those types of vehicles and the liability on Motorized RV’s. A trailer’s liability is covered by the policy on the tow vehicle.
*Unemployment Insurance paid by employers pays a temporary income for laid-off workers.
*Worker’s Compensation Insurance paid for by the employer, pays for medical treatments of employees who are injured on the job, and temporary income if the injured employee is unable to work due to the injury.
There are other coverages that I’m not going to explain at this point, and those are: Inland Marine, Commercial Auto, Errors and Ommissions, Professional Liability, Travel Insurance, Accident Insurance, Aircraft Insurance, and more.
The main job of insurance is to indemnify the insured. That means to put the insured back in the same condition as the insured was in prior to the incident whether it be financially, or to repair or replace damaged property.