Insurance Meaning, Importance, Types, and Terms 2020

Insurance is dicey. It’s not like buying a piece of furniture or clothes or even groceries. When you buy insurance, you buy a promise. 

It is a promise that if something disastrous happens to your business, your carrier is will assist you to make your business whole again.

You can find an insurance policy to cover almost anything that you can think of but some deserve a place in our financial plan more than others.  

Let’s take a big-picture view of what insurance really means.

What is Insurance ?

Insurance is a risk-transfer tool that guarantees full or partial financial benefit for the loss or damage caused by event(s) beyond the control of the insured party.

It is a contract that provides security to an individual or entity against a loss. This protection promises settlement from an insurance company.

Guarding oneself is a normal practice but becomes more venerated when the law is involved.

There is a legal agreement that covers two parties – namely, the insurance company known as the insurer and the individual (the insured).

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The insured pays the insurance company, fixed amounts, and the insurer settles to make good of the losses of the insured on the happening of the insured eventuality.

Importance of Insurance

Sometimes, though, it’s tempting to question the value of insurance because it is an intangible product.

But, here are five reasons why insurance is important.

  1. Lenders Require Insurance

Mortgage lenders want evidence of insurance before buying or building a new building.

Without insurance, your business can’t get the funding it needs to take its first step, and the established business can’t evolve and better compete.

  • Insurance is Compulsory in Some States

Insurance is important because sometimes it’s the law! A great example of this is auto insurance.

  • Insurance Grants Peace of Mind

Insurance, an intangible, provides another intangible: equanimity.

Entrepreneurs can take on certain business undertakings because they can shift the risk-all thanks to insurance.

  • Insurance Ensures Stability

Insurance is a safety net when risks go wrong. Life insurance can sustain the life of a family, should a member be lost. The same applies to business.

Should an important member or piece of tools go out of commission, the business can survive, thanks to insurance.

Types of Insurance Policies

There are different types of insurance policies depending on what exactly you wish to protect.

Below are a few of them:

  • Life Insurance
  • Accidents and Health Insurance
  • Rentals’ Insurance
  • Auto/Car Insurance
  • Property Insurance
  • Engineering Insurance
Insurance Terms You Should Get Familiar With

Now that you understand how insurance works and know about the types, it is high time you learned some terms associated with it.

Insurance Policy is a contract among an insurer and the insured which determines the claims which the insurer is required to pay by law. 

Insurance Premium is the amount of money an individual or entity pays for an insurance policy.

Insurance Broker is an insurance risk management professional that provides advice in the interest of their clients.

Insurance Agent is an organization or individual that pleads with and discusses contracts on behalf of the insurer.

Insurance Underwriter is a person who assesses and examines the risks involved in insuring people and assets.

Insurance Company

There are several insurance companies and offices scattered all over the world.

Below are some of the insurance companies:

  • Geico.
  • Allstate.
  • Progressive.
  • Auto-Owners Insurance.
  • Esurance.
  • Liberty Mutual Insurance.
  • Nationwide Insurance.
  • Safeco.
  • MetLife.
  • Guinea Insurance Plc.
  • Wapic Insurance Plc.
  • USAA Group.
  • NJM Insurance Group.
  • Amica Mutual Group.
  • Automobile Club of Southern California.
  • California Casualty Group.
  • Chubb INA Group and so on.

Summary

In general insurance, the benefit is normally comparable to the loss incurred, whereas in life insurance usually a fixed sum is paid.

insurance policy
insurance policy

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