What is insurance or what is called insurance? What are the types of insurance? Through today's article, we are going to discuss insurance in detail.
What does insurance mean?
Life is not guaranteed in our fast lifestyle.
However, almost all of us have families and the thoughts of loved ones around us are always on our mind.
And, we want to make some arrangements for our family to be healthy and happy in our present.
Again, when we spend our hard-earned money to buy a precious thing, the thought of its durability or damage also worries us.
So, for the convenience of our loved ones or to protect something valuable, we often take insurance for that thing or ourselves. makes you worry.
So, today in our article we will discuss in detail what is this insurance? Or what is insurance, and what are its types, about these issues.
First of all, what does this insurance mean?
What is insurance?
Insurance is one of the most effective risk management tools.
Any person or business can be protected from various financial losses or risks if the management is adopted.
Although mental and psychological damage is never compensable, at least financial loss can be covered by this insurance.
Life is definitely uncertain, which you cannot change in any way, but insurance definitely helps you reduce your life-related financial losses to a great extent.
What is Insurance or Definition of Insurance:
Insurance is a legal contract between two parties.
And, this contract is basically signed between the insurance company (insurer) and the individual (insured).
Where the insurance company promises to indemnify the insured for any accidental financial loss in return for the premium paid by him.
Simply put, insurance is a risk transfer process.
In this process you transfer your risk to the insurance company.
And, you get financial coverage from the company for any financial loss you face due to an unexpected event.
The amount you pay to arrange this insurance is called 'premium'.
You can insure everything from your life to the smartphone you use.
That is, in a word, what is 'important' to you is what you are able to protect against financial loss through insurance.
Insurance coverage can be said to be a type of contract written in the form of a financial protection policy.
This policy protects people from financial risks created due to unexpected events.
The insured person is the policyholder of the insurance.
And, the companies that arrange the insurance are insurers, insurance companies, insurance carriers or underwriters.
The policyholder usually pays a certain amount of 'premium' or money to the insurance company.
And, instead of this premium, the insurance company provides the insurance cover to the person.
However, insurance is a contract subject to certain conditions.
The insurance companies indemnify their policyholders only as per the agreements.
The amount of insurance coverage or 'policy limit' is determined depending on the amount of premium paid.
So I hope you understand what insurance means.
The insured person is the policyholder of the insurance
What are the components of insurance?
Friends, now you have understood what is insurance, let us now know the components of insurance one by one.
Before choosing any insurance policy it is important to understand how insurance works.
Any general insurance policy has a few basic components, they are –
1. Premium:
The premium of a policy is the price of that insurance.
The premium is usually calculated as a monthly cost.
The amount of premium on any insurance policy is determined based on the amount of risk you or your business is exposed to and the type of insurance coverage you want.
Suppose you own a car and have a history of accidents while driving.
So in that case, you will want to insure more money when choosing your car insurance policy.
Also, premiums are higher in higher value insurances.
On the other hand, a careful driver will insure less than you.
Hence, different policyholders may charge different premiums for the same type of policy.
2. Policy Limit:
The policy limit is the maximum amount a policyholder will pay under a policy for a covered loss.
A maximum policy limit can be set per period (eg annual or policy term), per loss or injury or depending on the life of the policy.
Generally, higher policy limits lead to higher premiums.
For an ordinary life insurance policy, the maximum amount paid by the insurer is considered to be the face value.
which is paid to the nominee after the death of the insured.
3. Deductible:
Deductible is a fixed amount that the policyholder has to pay before the insurer pays the claim.
Deductibles are applied on a per-policy or per-claim basis, depending on the insurance company and policy type.
Generally, policies with higher deductibles are less expensive, as higher expenses reduce the amount of claim money.
4. Special considerations:
When it comes to health insurance, those who have chronic health problems or require regular medical treatment should opt for policies with lower deductibles.
However, annual premiums are more costly than policies with relatively high deductibles.
However, the best choice is a medical insurance with low cost round the year.
