What is insurance?
Insurance is protection against financial loss due to an unexpected event. It covers things like medical bills, lost wages, and property damage.
In today’s world, everyone needs some form of insurance. Whether it be auto or life insurance, there are many types available.
- a practice or arrangement by which a company or government agency provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium.
“many new borrowers take out insurance against unemployment or sickness”
- a thing providing protection against a possible eventuality.
“adherence to high personal standards of conduct is excellent insurance against personal problems”
Merriam Webster Online
1 a: coverage by contract whereby one party undertakes to indemnify or guarantee another against loss by a specified contingency or peril
b: the business of insuring persons or property
c: the sum for which something is insured
2: a means of guaranteeing protection or safety
“The contract is your insurance against price changes.”
“Frequent hand washing is good insurance against the common cold.”
3 gambling: a side bet that a player in blackjack may place when the dealer’s first faceup card is an ace.
Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss.
An entity which provides insurance is known as an insurer, an insurance company, an insurance carrier or an underwriter. A person or entity who buys insurance is known as a policyholder, while a person or entity covered under the policy is called an insured. Policyholder and insured are often used as but are not necessarily synonyms, as coverage can sometimes extend to additional insureds who did not buy the insurance. The insurance transaction involves the policyholder assuming a guaranteed, known, and relatively small loss in the form of a payment to the insurer (a premium) in exchange for the insurer’s promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms. Furthermore, it usually involves something in which the insured has an insurable interest established by ownership, possession, or pre-existing relationship.
Different types of insurance
Auto insurance protects drivers from financial losses caused by accidents. This includes paying for repairs to damaged vehicles as well as any injuries sustained by passengers.
Life insurance provides protection against death. If you die before reaching retirement age, your beneficiaries will receive money based on the policy’s terms.
Disability insurance pays benefits when an insured becomes disabled and unable to perform his/her job duties. Benefits are paid directly to the beneficiary, usually the spouse or children.
There are two main types of health insurance: private and public. Private insurance covers medical expenses not covered by Medicare or Medicaid. Public insurance includes Medicare and Medicaid.
A homeowner’s policy protects against damage to your home caused by fire, windstorm, lightning, vandalism, theft, and other events. You should also consider flood insurance if you live near a body of water.
If you own a house, you need homeowners insurance. This type of coverage pays for repairs to your property after a disaster. However, renters insurance covers only losses due to accidental damage to your personal belongings.
Travel insurance protects you from unexpected events while traveling. There are two main categories of travel insurance: trip cancellation and trip interruption. Trip cancellation coverage pays out when you cancel or postpone a trip due to unforeseen circumstances. Trip interruption coverage pays out when you need to make changes to your plans because of an emergency situation.