According to law and economics insurance is a type of risk management principally exercised to circumvent the risk of potential loss. A company selling the insurance is called insurer. It has become a lucrative business around the globe. Insurance rates, which are used to determine the amount of premium, may vary from company to company. An uncomplicated example is life insurance. A person pays a certain amount of premiums to the insurer. When he dies a predefined amount is given to his family.
Types of Insurance
Nothing is predictable on this dangerous planet. Any accident can happen or any disease can attack us. So, we should be prepared for it. There are various types of insurance policies focusing different fields of life.
Health Insurance
Various insurers offer health insurance plans. If the insured person is injured due to accident or is sick then the medical expenses are paid by the insurer. There is a lawful indenture between the insurer and the insured person.
Dental Insurance
Insurance intended to disburse the expenses related to dental care is called dental insurance. Dental insurance helps people to cope with the pecuniary hardships caused by sudden dental costs.
Auto Insurance
The insurance purchased for cars, trucks, and all other auto mobiles is called auto insurance or automobile insurance. The principal benefit of car insurance is the provision of protection against the losses occurred due to traffic accidents. If an insured vehicle is damaged as a result of accident, the repairing costs are paid by insurer. Auto insurance companies also provide replacements, if the vehicle is totally destroyed. It is obligatory in many countries to purchase automobile insurance. One can choose the right car insurance by comparing auto insurance quotes provided by different companies.
Pet Insurance
If your insured pet is injured or suffering from illness, pet insurance will pay the veterinary expenses. Some pet insurance policies are also designed to pay if the insured pet dies, is lost or stolen. Pet insurance is mostly available in developed countries.
Travel Insurance
Insurance which is planned to tackle financial and other potential losses while travelling within your country or internationally is called travel insurance. Travel insurance mostly hedge against the risks like theft, loss, delayed baggage, emergency evacuation, damage to personal possessions, legal assistance, accidental death, overseas funeral expenses etc.
Life Insurance
In life insurance there is a contract between insured and insurer. According to that contract if the insured person dies the insurer will pay an amount of money to his family. In return the insured person will pay premium to insurer. There are two types of life insurance, protection policies and investment policies. Another life based insurance is term life insurance. The insurance coverage is provided for a limited time period. After that period, its insured choice that he want to drop the policy or cotinue indemnity by paying premiums for next term.
Many insurers are providing their services. Some of the well-known insurance companies are state farm insurance, allstate insurance, farmers insurance and progressive insurance.
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There are a lot of types of insurance, but let's stick with the main ones:
Auto Insurance
Auto insurance also known as
- vehicle insurance
- car insurance
- motor insurance
It is purchased for cars, trucks, motorcycles and other vehicles. The primary use of auto insurance is to provide protection against losses incurred as a result traffic accidents.
There were more than 180 million automobiles in USA in 2006. About 175 million were covered by auto insurance companies. It's the largest auto insurance market in the world. There are more than 35 million automobiles in Russia. About 34 million are insured as well. China - 10 million insured automobiles.
Auto insurance provides:
a) Property coverage - it pays for thief or damage of your car
b) Medical coverage - it pays for your responsibility to others for bodily injury or property damage
c) Liability coverage - it pays for the cost of treating injuries, lost wages or even funeral costs.
Insurance premium varies for males and females, teenagers and adults. According to the statistics males drive more miles than females and consequently have a proportionally higher accident involvement at all ages. Teenagers who have no driving record will have higher car insurance premiums as well.
Owners of sport cars, motorcycles would have higher insurance premiums as opposed to compact cars, midsized cars and electric cars.
Your auto insurance policy is a contract, most polices are issued from six months to one year period. In USA, Russia, Brazil, Japan auto insurance company should notify you by mail, phone or any other method to renew your policy.
Home Insurance
As auto insurance, home insurance provides compensation or insure you against damage of a home from disasters. Sometimes it's called hazard insurance or homeowners insurance as well. In the real estate industry it is abbreviated as HOI.
This is the type of insurance that covers private homes. It can include:
- losses occurring to one's home
- loss of home use
- home contents
- loss of other personal possessions of the homeowner
In some geographical areas, it is necessary to buy additional insurance plan for certain types of disasters, for example:
- flood insurance
- earthquakes
- war
They excluded from original policy plan and require additional coverage. Home insurance policy is a lengthy contract. It names what will and what will not be paid in the case of various events. It can be seasonal or long term.
Home insurance company should notify you by mail, phone or any other method to renew your policy.
Health Insurance
Health insurance is the type of insurance that pays for medical expenses. It also known as:
health coverage
health care coverage
health benefits
Policy can be purchased by individual or company on group basis to cover its employees. Health insurance policy is a lengthy contract. Policyholders should pay premiums to help protect themselves from unexpected healthcare expenses. Insurance contract can be renewable annually or monthly.
In 2008 approximately 84% of USA citizens have health insurance:
About 9% purchase health insurance directly
About 60% obtain it through an employer
About 20% of Americans obtain health insurance from various government agencies.
In 2006, there were 16% of Americans (47 million people) who were without health insurance. Average spending is higher in the individual market. Many medical expense plans include coverage for dental expenses. Stand-alone dental insurance is also available.
Health care system is mainly in private hands in USA. Hospitals and doctors generally funded by payments from patients and insurance.
Hospitals provide some outpatient care in their emergency rooms and specialty clinics, but primarily exist to provide inpatient care.
In 2008 a report by the Commonwealth Fund ranked the USA last in the quality of health care among the 19 compared countries. According to the Institute of Medicine of the National Academy of Sciences, the United States is the "only wealthy, industrialized nation that does not ensure that all citizens have coverage".
Life Insurance
Life insurance is also known as life assurance. Insurer (or Life Insurance Company) agrees to pay sum of money upon the occurrence of the policyholder's death, illness, critical illness, terminal illness or other event. Policyholder pays a fee at regular intervals or in lump sums. This fee is called a premium.
Life insurance can be:
Temporary.
It's life insurance coverage for a specified term of time for a specified fee (premium). Usually premium buys protection in the event of death and nothing else.
Permanent
Type of insurance that remains in force until the policy matures (in other words pays out), unless the policyholder fails to pay the specified fee when due.
As with most insurance policies, life insurance is a contract between the insurer and the policyholder whereby a benefit is paid to the designated beneficiaries if an insured event occurs which is covered by the policy.
Insured events that may be covered include:
Protection policies
Investment policies
Illness
Each contract may include limitations of the insured events. Usually they a written to limit the liability of the policyholder: for example claims relating to war, suicide or fraud. Any misrepresentations by the insured on the application will cause the nullification of the contract.
Upon the insured's death or illness the insurance company requires acceptable proof before it pays the claim. For example list of necessary documents that required upon the policyholder's death:
Death certificate
Completed, signed and notarized claim form
If insured's death looks suspicious, it can be investigated by insurance company before deciding whether it has an obligation to pay the claim. Proceeds from the policy may be paid as a lump sum or as an annuity.
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