What Is Insurance? This is a question that many would regard as very basic and fundamental.
Many would assume that everyone knows exactly what insurance is.
Let us assume for a moment that not everyone does know this for sure and then based on this assumption, we can go ahead to explain as briefly and simply as we can.
Insurance is a transaction between two parties one referred to as the insurer (insurance companies) and the other referred to as the insured (you and I).
The insurance company offers to provide the insured with an agreed amount of cover so long as the insured agrees to make certain payments based on an agreed upon rates and time.
This payment is called your premium.
What Do We Mean By Cover? Cover is basically an assurance that some compensation would be given to the insured to a certain extent when or if certain agreed upon events occur.
An example is auto insurance.
When you get a collision policy fro your insurer, what you are simply entering into is an agreement that whenever your car hits something, your insurance company would pay for the repairs of the car to the extent of your coverage.
What Determines The Amount I Get Settled With? The amount you are settled with is determined by you when you buy your policy.
Which is why you would always hear references to "The amount of cover bought.
" The amount of cover you buy would determine what your premium would be.
The more you want to be settled with, the more premium you should be ready to pay.
What Happens If I Never Need To Make A Claim? This is one area that has many people worried.
depending on the policy in question, when you don't need to make a claim maybe because the peril for which you are covered never occurred, you simply lose your money.
The insurance company took the risk of covering you in case the peril occurred.
This has caused a lot of people to commit insurance scams as they try to initiate an occurrence of the peril so they can get settled.
Like stated a bit earlier, it depends on the policy in question.
There are some life insurance policies that have cash back value.
These are usually term life policy which last for a given period.
After the given period, the sum assured is usually paid to the insured with some interest.
If however the insured dies while the policy is still in force, the insured's beneficiaries would be paid the full cover amount.
There are different insurance policies for different situations, for individuals, businesses and even insurance companies themselves.
For individuals, you can get auto insurance, health insurance, home insurance, life insurance, long term care etc...
Know this, insurance is so very important and this is why you need to get covered.