What is Insurance and Types of Insurance

Insurance Definition

Insurance provides protection against unexpected events or circumstances for a specific period of time in exchange for a premium paid to an insurance company. The premium is the amount paid for the coverage of the risk, and it varies depending on the level of coverage needed.

The company is called an Insurer, and the insurance it provides is called a policy. The person or entity looking to purchase the policy is called the proposer, who can be an individual, entity, or company. Once the proposer buys the policy, they are referred to as the policyholder. The protection provided for the individual, property, or assets is called insurance coverage.

Insurance companies provide different types of coverage depending on the level of risk or loss being covered. Some types of insurance are designed to protect against specific risks or events. Here are the most common types of insurance available in the market.

Health Insurance

Health insurance covers medical expenses like surgery, medication, and hospitalization, protecting against high costs during the policy year. Some policies also cover other expenses like consumables, outpatient services, maternity care, hospital room rent, and health checkups.

Individuals can buy health insurance to cover themselves or their family members, while employers can provide group health insurance to their employees. When comparing individual health insurance, group insurance policies offer better coverage at a lower premium.

The health insurance company has a network of hospitals where they agreed to lower prices for medical expenses or discounted charges covered by the policy. Make sure to look at the list of hospitals in the network provided by the insurance company.

Life Insurance

Life insurance is a contract between the policyholder and the insurance company. In this agreement, the insurance company pays a sum of money to the beneficiary or nominee in the event of the policyholder's death during the policy term. Additionally, the insurance company may also provide a payout to the policyholder if they survive the policy term.

Life insurance policyholders must pay the premium to the insurance company in a one-time or regular manner, such as monthly, quarterly, semi-annually, or annually. The term of the life insurance policy can be 10 years, 15 years, 20 years, 25 years or for a lifetime.

Auto Insurance

Auto insurance, also known as motor insurance, is a type of insurance that provides coverage for own vehicle damage caused by accidents or natural disasters, theft of the vehicle, personal injury, or injury to a third party during accidents.

Some car insurance plans include coverage for damage to third party vehicles and zero depreciation as extra options. They also offer discounts for policy renewals with no claims made during the policy period.

In some countries, it is mandatory to buy motor insurance when purchasing a vehicle. Not renewing the insurance can lead to fines or penalties as per the law.

Home Insurance

Home insurance is offered by insurance companies to protect against the risks of damage to a house caused by natural disasters, fire, or other events. It also covers other belongings inside the house, such as furniture, appliances, and clothes.

Sometimes insurance companies cover the fence or gate area of the house and also provide insurance for injuries to other people inside the house caused by events or pets

The price of home insurance depends on the property's location, age of the building, construction type, size and condition of the property, and the property's claim history.

Travel Insurance

Travel insurance provides coverage for risks that may occur during travels, such as trip cancellation due to weather, illness, injury, or emergencies. It also covers medical emergencies, including hospitalization, surgery, and evacuation due to emergencies. Additionally, travel insurance offers insurance for baggage loss or damage.

Travel insurance is a good idea when traveling to other countries or going on long vacations. While it may not be required for some countries, it is recommended for visa applications.

Pet Insurance

Pet insurance provides coverage for your pet's health, including illnesses, injuries, and accidents. Some policies also cover surgeries and diagnostic tests. The cost of the insurance premium depends on the coverage included in the policy, with some plans only covering accidents and others covering accidents and illnesses.