Insurance Companies
Learn about the best insurance companies that will provide financial support and reduce uncertainties in human life and business. Discover the top insurance companies in today’s market.
Insurance can contribute a lot to society's economic growth by providing stability to the functioning of the process. Learn more about the importance of insurance to any individual or any business in this article.
What is Insurance?
Insurance is a legal contract – it is a policy that a business or an individual can receive financial reimbursement or protection against losses. This reimbursement or protection is provided by an insurance company with which the contract is signed. The insurer combines all of its clients’ risks together – this helps the insurer take in a consistent amount of money each month while also paying out a consistent amount of money.
Insurance policies are used to minimize the risk of financial losses that may result from damage to the insured individual or his property. It can also protect the insured individual from liability from damage or injury that was inflicted on a third party.
How Insurance Works
There are different types of insurance policies, and essentially, any individual or business can find an insurance company that is willing to insure them for a price.
The most common type of personal insurance policies is health, auto, homeowners and life. A lot of people in the United States have at least one of these kinds of insurance. Also, car insurance is required by law.
Business insurance policies insure business owners against specific types of business risks. For example, if you have a food business, you would need a policy that will cover damage or injury that can happen while cooking with a deep fryer. But if you are an auto dealer, you might not be subject to this kind of risk, but you might want to look for an insurance policy that will cover damages or injuries that could happen during test drives.
There are also other insurance policies for specific needs like kidnap and ransom, medical malpractice, and professional liability insurance. The official name for these kinds of policies is: "errors and omissions insurance."
Insurance Policy Components
When looking for an insurance policy, it is important to know how insurance works.
A good understanding of these concepts can go a long way in helping you pick the right policy that fits your needs.
Premium – A policy’s premium is the insurance price. The premium is also determined by the insurer based on your risk profile, which can include creditworthiness.
Policy Limit – This is the maximum amount of an insurance company that will pay under a policy for a covered loss. Policy limits may be set per period, loss, injury, or over the life of the policy. This is also referred to as the lifetime maximum.
Deductible – This is some amount that the policy buyer must pay themselves before the insurer pays for the rest of the claim’s cost. Deductibles usually serve as deterrents to policyholders from claiming many small and insignificant claims. Deductibles can also apply per-policy or per-claim, depending on the insurer and the policy type.
