Insurance is a form of risk protection. The buyer’s objective is to mitigate potential financial loss.
In an insurance contract, one party undertakes to pay for another party’s financial loss through the occurrence of some specified events. The principle of mutual sharing of losses forms the backbone of insurance business. If you want to obtain insurance coverage, against any possible outcome, commit to a regular payments – called premiums - program, to an insurance company, the company provides you with a insurance policy. The company guarantees to pay a pre-agreed sum of money for the type of loss you may incur as stated in the policy.
Insurance typically deals with probable events, where the occurrences of such events would lead to some type of losses ultimately. Fire, floods and accidents are just some examples here. There are also instances where people buy an insurance policy to compensate unusual situations for example performances have been known to insure their legs against injury. Insurance policies can be grouped into three types:
1. Life
In life insurance policy, the compensation is only paid out upon the death of the insured person. The amount, either in a lump sum or in instalments, would be paid out to the beneficiary. |
Some variations of type of policies have a cash value. Policyholders may borrow based on the cash value or surrender the policy in return of its cash value.
Burial insurance for Seniors
Annuities
These are actually savings plans. Policyholders receive fixed and regular payment upon retirement. When the annuitant [owner of the annuity] passes away before the full amount is paid out, a named beneficiary would be the next recipient of the instalments.
Dividends
Some insurance policies offer cash refund through dividends. In such participating policies, insurance company pays out dividends when there is a net positive between premiums paid versus promised benefits and administrative costs. Dividends is also paid out when premium funds are utilized for investment purposes which resulted a net gain for the insurance company
2. Health
The cost of medical care can be covered in part or whole through this policy. This is a popular and maybe necessary policy due to the escalating medical care cost. Perhaps this also explains the popularity of dental insurance.
3. Property & Liability
Property and liability insurance is to protect financial loss of assets for individuals and/or businesses. Property insurance, like car insurance for instance, protects against possessions that are to be damaged, destroyed, or lost. Liability insurance protects against possible financial losses derived from causing bodily injury or harm to another individual or property owned by others |
