Taking charge of one’s life includes knowing the importance of insurance. If coverage is in force for life or property, a lot could be saved in an emergency or loss.
That is why it is essential to understand the concept of insurance, how it works, and the best way to get the most out of it. This post will look at the right definition, different types of insurance and the basic part of an insurance contract.
What is insurance?
It is a type of contract between you, the insured, and an insurer to protect you from financial loss. In exchange, you will pay an agreed-upon fee for your protection (coverage), which can be paid monthly, bi-monthly, quarterly, or annually.
Therefore, in the event of an accident or loss, depending on the contract, also known as a policy, the provider will cover the financial loss or manage the risk as agreed and signed.
Even though insurance means protecting you from loss, there are different types of it because one just can not cover every aspect of your life.
What are the top 3 types of coverage?
Many things are eligible to go under insurance, but they have to be divided into categories first. This way, you can break them down further.
More so, it is necessary to note that insurance can be provided by the public sector, such as the government at the Federal or State level, private insurance sold privately by companies on the marketplace, and employer-provided insurance from your workplace.
Some of the popular public coverage fall in the health category such as Medicare, Medicaid, CHIP,
With this out of the way, we can explore insurance types and categorize them accordingly.
- Life
Life insurance is coverage an insurance provider provides over your life. This type of insurance extends to your family members, who become beneficiaries of the coverage’s dividends. More so, life insurance comes in 2 major different types such as:
- Permanent life insurance, such as whole life insurance and
- Temporary life insurance, such as term life insurance.
- Health
It is a coverage you buy for your health. In the event of sickness or as harmless as a hospital checkup, health insurance covers you in line with the policy. Health insurance also covers hospitalization. You can also find many coverage under health, such as vision plans, dental plans, disability plans, etc.
- Property
As you acquire properties like a car, a home, land, and other items you purchase, it is time to look at property insurance. For example, it becomes a necessity for a homeowner to get coverage for their home because of unforeseen financial loss. You will be at rest when you know that in the event of a fire outbreak, flood, or break-in that leads to property damage or loss, the insurance company will help cover the financial problem instead of you repairing your home out of your pocket.
- Commercial
Businesses purchase this coverage to protect them against claims from various incidents likely to lead to financial loss. Commercial coverage also protects businesses from court cases or slander from the public. You can find many coverage with different policies under commercial coverage.
What are the four parts of an insurance contract?
While signing a policy contract, you must come across many sections. However, the essential parts you must look out for are the following sections:
- Declaration page
- Agreement page
- Exclusion page
- Conditions page
The declaration
This page will be the part you will encounter first in the contract form. It tells you who the policy covers. After that, you will learn the risks, premiums, and insurance policies.
The agreement
This page contains everything the insurance company agreed upon. It is expository because everything under coverage comes alive here for transparency.
The exclusions
Here, you will find what the insurer will not cover. All the losses, what will cause a financial loss that will not be covered, and the out come of the loss that will not be a bother to the insurer.
The condition
You must meet these conditions or requirements for the insurer to provide coverage.
