Thursday, June 11, 2009

MEANING AND TYPES OF INSURANCE.

According to Encarta Encyclopedia, insurance is a contractual arrangement that provides for compensation by an insurer to an insured part if a specify set of circumstances occurs. These circumstances could be accident, personal injury, death, loss or damage to property or any other number of instances that can compensated for financially.

How does the insurance company operate? The insurance company operates by collecting small contributions from many people who are exposed to risks. This money collected is used to settle those who fall victim of such risks. These contributions which the insurance company collects are called premium.

To some individuals, insurance is seen as an investment. But is insurance an investment? No I don’t think that insurance is an investment. Insurance is a way we share our risk with others. It is a way of getting protection to reduce damages associated with some mishaps. No matter how careful one may be, he/she must need one type of insurance or the other.

When you buy insurance, it means that you are sharing your risk with others. Simply, the insurance company is a risk management company that can help anyone to reduce risks associated in day to day activities. Man is vulnerable to dangers and by virtue of this need insurance to help him cope in an unfriendly world.

Another thing you have to know when buying insurance is “insurance policy”. The insurance policy is the rule or guideline of the insurance company. It is the insurance policy that will help you to choose a better option for your insurance needs.

Here are few major types of insurances:

  • Life insurance:Descendent's family receives financial benefits. Life insurances also offer paid proceeds to the beneficiary.
  • Automobile insurance:Usually automobile insurances cover damages and legal financial expenditures of the automobile driver.
  • Health insurance:Health insurance cover the expenditures associated to treatment and medical expenditures.
  • Credit insurance:Borrowers often fail to repay debts,loans and mortgages due to certain unavoidable circumstances,credit insurances can be of great help during such crisis.
  • Property insurance:Property protection insurance provide protection from risks associated to theft,fire,floods etc.
This type of insurance can be further classified into specialized forms as follows:
  • Fire Insurance
  • Earthquake Insurance
  • Flood Insurance
  • Home Insurance
  • Boiler Insurance

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