What is Insurance and how it works? do I need it in 2023?
what is insurance in simple words
Insurance is one of the most important segments of the service industry, and it supports the safe and predictable plans of other industries and people. Buying insurance shouldn’t be too difficult. yes, there is a lot to consider before buying Insurance, but remember, you are not alone. We tell you the latest and most important things to know about insurance in 2023.
Your provider can tell you much more than a policy document. Risk management professionals, brokers and experts can give you the information you need about insurance. but they are often not impartial and will try to refer you to certain companies and types of insurance. So first take some time to understand the issues and make sure your investment is sound.
Terms and definitions
it will be more useful if we define some terms related to now before buying Insurance:
- Insurance is a repayment contract. For example, it reimburses losses due to certain hazards such as fire, hurricane and earthquake.
- An insurer is the company or person that promises repayment.
- The insured is the person who receives the payment in other insurance types except life insurance, the name of the life insurance, the payment goes to the beneficiary named in the contract.
- Beneficiary / Beneficiary is the person who will benefit from the insurance, usually the insured himself, in life insurance, it is the person designated in the policy.
- The premium is the money you pay the insurer to buy insurance and you usually pay annually or every 6 months.
- The policy is the Contract between you and insurer.
- The risk is the events, risks or dangers that will happen to the insured.
- Coverage is the assurance that the insurer give to you when the insured suffers a loss. The assurance can be different things, if it’s money, the amount paid by the company we call Compensation.
- The agency is the dealer of the company in different places, it signs a contract with you by the company and pays you a guarantee or compensation in case of Risk.
- Unlike the Agency, the broker is the person or company that is on the side of the insurer. Therefore the broker helps in the selection of the best and appropriate insurance and protects the rights of the insurer in case of damage.
What does insurance do, do I need insurance in 2023?
By making insurance, you take the risk and management burden of the risks in your life and carry it to the insurance company. You can have an easy and happy life by taking this burden off your shoulders and leaving the management of this risk to a more professional team. That’s what insurance companies are for. By paying a small premium per month or year, you throw off the related risk and the burden of grievance it will create and leave it to the company. If you have traffic insurance, the company will cover the financial and personal damage you gave to the other party in the event of an accident, or if you have automobile insurance, the company will still cover your loss even if you are responsible for the accident, other types of insurance works with the same process and logic.
How insurance companies works and make money
Insurance falls into two main categories:
- Property (Car, Home, Business and …) and Accident insurance (P&C), Property and casualty insurance protects businesses and individuals against both physical and financial losses and risks related to their belongings or assets.
- Life and Health insurance, Life and health insurance insures people against financial loss due to premature death, sickness or illness. best life insurance companies
To protect against loss and risk:
- Insurance Companies such as the prudential life insurance company estimates an annual cost or premium to accept the risk to cover your home, business, car, Life or Helth. Premiums are based on how much insurance companies think they should pay for next year’s claims.
- Monthly or annually, you pay a premium to your insurer for assuming that risk on your behalf.
- The insurance company puts all premiums into one large pool. Your have an annual contract, so the pool only operates for one year at a time.
- Insurance company uses multiple pools of premiums to pay for the losses of several claimants that year.
- If you don’t make a claim, you won’t get your money back. Instead, the company pools the premiums of all policyholders.. If you make a claim the money comes from the pool of policyholders’ premiums.
- The National Association of Insurance Commissioners (NAIC) provides expertise, data, and analysis for commissioners to effectively regulate the industry and protect consumers.
Frequently asked questions – FAQ
- What is insurance in simple words?
Insurance is an arrangement in which you pay money to a company, and they pay money to you if something unpleasant happens to you. For example if someone stole your property or damaged it, or if you get a serious illness.
- What is insurance premium mean?
an agreed amount of money that you pay to a insurer company, either as one payment or as one of a series of yearly or monthly payments
- What is insurance premium tax?
Premium Tax (IPT) is a tax on insurers, like VAT, that applies to most general premiums or potential premiums. After your provider collects the premium from you, pays the tax directly to the Government.
- What is insurance premium financing?
is the lending of funds to a person or company to cover the cost of the premium. Premium finance loans are often provided by a third party finance entity known as a premium financing company; however companies and brokerages occasionally provide premium financing services through premium finance platforms. Premium financing is mainly devoted to financing life insurance which differs from property and casualty insurance.
- What is insurance premium funding?
Insurance premium funding enables you to pay your annual premiums with a flexible repayment plan and allows you to keep working capital in your business.
Insurance FAQ 2
- what is insurance policy?
An insurance policy/plan is an contact between an individual (Policyholder) and a company (Provider). Based on the terms, the insurer provides a lump sum amount to the policyholder/nominee in case of an eventuality.
- what is policy number?
The insurance company gives the policy number to each policyholder. This unique number identifies customers’ policy. Therefore you use it as a reference number to identify your car insurance policy and coverage.
- what is policy holder?
The policyholder is the person who bought the insurance policy, and they get all the benefits described within that policy. They’re allowed to make changes to the policy or cancel it. The policyholder also has the option of adding more people to the policy, after which those people would also receive coverage.
- what is policy life cycle
The policy life cycle is a process that describes how you should prepare, implement and evaluate a policy. It serves as a didactic guide for policy novices rather than a strictly defined practical process.
- what is insurance deductible mean?
A deductible is a key feature of many types of coverages. It is the amount of money you pay out of your own pocket toward a covered claim. You’ll typically find deductibles for certain coverages in homeowners, renters and auto insurance policies.
Insurance FAQ 3
- what is insurance claim?
A claim is simply a request made to your provider. When you make a claim, and your property has damaged, or you have injured. You can only claim something that is caused by one of the named perils listed in your policy. Your policy covers and compensates you for losses or damages. A claim is a request for that compensation after you pay your share of the costs if you have any.
- what is insurance subrogation?
When one insurance company tries to get money back from another company, it called subrogation.
for example; If you injured in an accident, your health insurance pays for your immediate medical care. Then that company will typically try to get back money( subrogation) from your auto insurer or the other person’s insurer.
- what is insurance surcharge?
It is an extra fee that the company adds to the premium. In some types such as car insurance, if you have an accident that you are at least 51% at fault, your insurer company charge you more and your premium can go up when you renew your policy. This increase is called a surcharge.