A promise of compensation for specific potential future losses in exchange for a periodic payment. Insurance is designed to protect the financial well-being of an individual, company or other entity in the case of unexpected loss. Some forms of insurance are required by law, while others are optional. Agreeing to the terms of an insurance policy creates a contract between the insured and the insurer. In exchange for payments from the insured (called premiums), the insurer agrees to pay the policy holder a sum of money upon the occurrence of a specific event. In most cases, the policy holder pays part of the loss (called the deductible), and the insurer pays the rest. Examples include car insurance, health insurance, disability insurance, life insurance, and business insurance.
An insurance broker (also insurance agent) sells, solicits, or negotiates insurance for compensation.
When shopping around for an insurance policy, look for the best priced package that is right for you - prices can vary from one insurance company to the next. And make sure you know what you want. Some individuals, for example, prefer 24-hour claims service or face-to-face contact with an insurance representative. Also consider the claims settlement process, the amount of the deductible and the extent of the replacement coverage. Insurance companies and the policies they offer are not all the same, so think about more than just the price.
Insurance involves pooling funds from many insured entities to pay for the losses that some may incur. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the event occurring. In order to be an insurable risk, the risk insured against must meet certain characteristics. Insurance as a financial intermediary is a commercial enterprise and a major part of the financial services industry, but individual entities can also self-insure through saving money for possible future losses.
Methods of insurance:
Co-insurance – risks shared between insurers
Dual insurance – risks having two or more policies with same coverage
Self-insurance – situations where risk is not transferred to insurance companies and solely retained by the entities or individuals themselves
Reinsurance – situations when Insurer passes some part of or all risks to another Insurer called Reinsurer
Types of insurance:
Auto insurance, Vehicle insurance, Gap insurance, Health insurance, Dental insurance, Accident, sickness, and unemployment insurance, Casualty insurance, Crime insurance, Life insurance, Burial insurance, Property insurance, fire insurance, flood insurance, earthquake insurance, home insurance, inland marine insurance or boiler insurance, Liability insurance, Payment protection insurance, Travel insurance, Insurance companies...
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