Insurance is a very significant part of our lives. It is what guards us, secures us, and even our loved ones from any sort of mishap. There are many sorts of insurances available out there. And you can get many for yourself, as per your need, as well.
Why do we Need Insurance?
Life is uncertain; there are no guarantees or predictions about what will happen in one's life. Similarly, businesses also don't have any guarantee as they face many unexpected losses or damages in the long run. Assets like cars, bikes, etc. also don't have any certainty in their lifetime, they can get stolen or damaged in the long run. One can fight all these risks with an insurance cover.
Insurance is generally defined as a contract which is also called a policy. An insurance policy is a contract in which an individual or an organization gets financial protection and compensation for any damages by the insurer of the insurance company. In simpler words, one can answer what is an insurance policy as a form of protection from any unexpected loss or damage. From this paragraph, one can get a clear overview of insurance meaning.
Principles of Insurance
To ensure the proper functioning of the insurance contract, the insurer and the insured have to follow the following principles.
Utmost Good Faith
Minimizing the loss
Importance of Insurance
Insurance plays a major role in the insured’s life. Here are a few pointers that will show how:
The insured’s family is protected with the help of insurance at the time something unexpected happens. Their family doesn't have to worry about the monetary aspects of the finances in this case.
We all know that unexpected events can occur at any time and are a part of life. In case of any injury, illness, or death, finances are the last thing that they need to worry about. This way, their emotional stress is also reduced to an extent.
Insurance is a great financial security to an individual's family. An insurance policy gives the family the coverage needed as well as the courage to move on.
Insurance is peace of mind for the insured in case of theft or medical emergency. This way they would not have to go and arrange money or go into a panic mode.
The funds which are provided by the insurance company are well enough for managing the school fees of the insured children. It also takes care of their standard of living.
Functions of Insurance
The functions of insurance can be listed as follows:
They provide certainty to the insured.
They ensure the protection of the family.
They are risk-sharing policies.
They prevent the damages that can come from loss.
It provides capital.
It’s known for improving efficiency.
It helps in boosting the economy.
Types of Insurance
After having gone through the following points, one can get an answer to the question of how many types of insurance are there?
Health insurance is a contract that is formed between a health insurer and a policyholder. This policyholder is also known as the insured person. In this contract, the health insurer agrees to pay the full medical cost of the insured or just a portion of it.
Vehicle insurance covers cars, motorcycles, trucks and all the other vehicles running on the road. This insurance is meant for giving protection against any physical damage or bodily injury that the vehicle suffers from recklessness or an accident. All the cost incurred to repair the vehicle is met by the insurance company.
Life insurance is a contract in which the beneficiary is paid a fixed amount of money by the insurer after the death of the insured. The beneficiary uses this money to clear out the debts of the insured and also to meet his/her financial expenses after the death of the insured. The beneficiary is usually the spouse of the deceased. The beneficiary name is mentioned in the contract.
Homeowners insurance protects one's house from the uncertainty of any damages. The insurance covers the house the insured person resides in and other associated structures connected to the house such as the balcony, garage and porch. The insurer will provide the amount incurred to repair any damage in the house or its associated structures.
Umbrella insurance is also known as liability insurance. It covers the cost that is incurred in excess of other insurance policies. It gives a person extra coverage on another type of insurance policy that he/she is in.
Renters insurance is meant for tenants who use it to protect their personal property from any damage or theft. The insurance covers all the assets owned by the tenants. This is done because the landlord doesn’t take any responsibility for the assets of the tenant. Nowadays, landlords are not allowing tenants who don't have renters insurance.
Travel insurance is good for those people who travel a lot. It covers trip cancellations, lost or misplaced luggage, travel accidents and even medical expenses.
Pet insurance is meant for meeting all the expenses that are incurred concerning the sickness and accidents of the pet. All the medical expenses of the pet are taken care of by the insurer.
All these insurances are provided by different types of insurance companies.