- 24 Mar 2021
- Reading time
- 7 minutes
Life isn’t a fairytale, so unexpected occurrences are bound to happen. There are no warnings for when such an incident would occur, which often leaves us flatfooted and helpless in the face of it. Blind planning can prove largely ineffective. Hence, insurance is your best bet for surviving these eventualities.
Insurance is a pact between the insurance company, and its customer (known as a policyholder, or the insured). Both parties arrive at an agreement, in which the insurance company promises to compensate the insured on a specific loss (or losses) that might be incurred during the validity period of the contract. In turn, the insured is also obligated to pay the insurance company a regular premium for the entire course of their agreement.
How Does Insurance Actually Work?
Although insurance does offer a world of good to a businessman, homeowner, car owner or any individual in question, it would be wise to understand how an insurance policy works before you get one. This knowledge will help you decide on the specific type you need, or if you even need one at all.
Auto insurance, life insurance, and house insurance make up some of the various types of insurance covers out there. But, irrespective of the kind of cover you need, the basic function is the same – to protect against some form of risk. A customer usually approaches an insurance company for this precise motive.
The insurance company provides the insurance cover (which is actually the auto insurance, home insurance, etc.) to the insured. The coverage may be in the form of a little monetary compensation to the insured object, its replacement, or compensation to the relatives of the insured in the case of death (life insurance). However, compensation is only given when the tragedy or risk actually occurs. Moreso, it is subject to terms stated during the agreement, known as insurance policy.
This means that if an individual applies for an auto insurance cover, and wrecks the car due to negligence or driving under the influence, the insurance company might choose to back out of compensating the individual if it violates their agreed terms.
The Insurance Premium
The insured also has to reimburse the insurance company with a premium on a monthly or annual basis. The premium is decided by the insurance company, and its value is also determined by the company. It is not uncommon that a customer with a bad history for that particular insurance cover might incur more premium to continue holding the policy.
The Policy Limit
Every insurance company has a policy limit, which is the maximum that they can pay to compensate for unfortunate eventualities. This policy limit differs among many insurance companies, and may also differ for customers insured under the same institution. As a rule of thumb, a higher insurance premium paid by a customer usually attracts a higher insurance policy.
Sure, the insurance company is obligated to compensate a customer when their need falls within the terms of their insurance policy. However, there may be cases where the insured has to foot part of the bill for an occurrence, while the insurance company covers the rest. The deductible that the insured is expected to pay is also dependent on the company and the type of insurance cover in question.
So, if you are looking for an insurance company, it would be best to find one that has a policy limit, a deductible, and a price premium that you are comfortable with. An insurance broker could be a great help in looking for that perfect insurance company, and we have a synopsis of some of the best insurance brokers near you.
Do you still feel unsure about where to get your insurance solution even after you’ve determined the importance of an insurance cover, and how it works? The reason is that there are numerous insurance companies out there, and it does get confusing to pick the right one. Fortunately, this is where our reviews about insurance companies come in handy. If you are looking for a cheap insurance company, or would like to compare insurance company quotes, or just searching for insurance companies near you, then these reviews could be very helpful to your efforts.
Points to Ponder on Before You Take That Big Leap
Insurance covers are good alright, but if you do not want to go in blind, there are some things that you should consider before doing so. These include:
This is a statement of the premium you would offer to the insurance company when you go for a particular cover. Bear in mind that insurance quotes are never constant since they are based on the information that you provided to the insurance provider concerning the type of insurance coverage that you want. But, if you are straightforward with your needs for an insurance cover, your insurance quote would most probably be equal to the premium that you would eventually have to pay.
Criteria involved in applying for insuranceInsurance is great, but in the end, only adults are eligible, or individuals on the cusp of adulthood (in the case of learners insurance). And age is merely one of the many criteria that an insurance company considers before they actually allow a customer to apply for insurance. Some others include income, medical history, employment status, etc. So, it would be best to find out the criteria required by the insurance company before applying.
Not everything is covered by an insurance cover. An insurance cover has limits to what it can protect you from, so it is advisable for you to read through the insurance policy first. This would help you know what your insurance can cover and what it cannot.
The Various Types of Insurance
There are many insurance types out there, and we’ll be letting you in on some of them.
- General Insurance
General Insurance is any insurance that isn’t life insurance. It covers your home, your property, your car, and any other thing at all, with the exception of your life.
- Life Insurance
Life insurance is one that takes effect after the death of the insured. It is meant to secure compensation for the dependents of the insured in the case of the insured’s death.
- Health Insurance
Health insurance is a type of insurance that is meant to help the insured pay less on medical bills. It could be specific for a particular disease or illness that the insured may be susceptible to, or it can be more generalized. As for coverage, it covers anything from vaccine shots, to health check-ups, prescriptions, etc.
- Dental Insurance
Dental insurance functions the same way as health insurance, with the difference being that it is geared towards the health of the teeth. It helps the insured to pay less for all dental care, cleanings, and other dental services.
- Travel Insurance
Travel insurance is meant to protect the insured by bearing part of the cost from any risk that may occur while travelling, such as loss of luggage or even the need for emergency medical care due to accidents incurred during a vacation.
- Homeowners Insurance
A must for every homeowner, homeowners insurance helps bear the cost of unfortunate occurrences in the home, such as natural disasters, thefts, or even renovations like a roof replacement.
- Renters Insurance
A tenant’s version of the homeowners insurance, renters insurance, is meant to help tenants in a building bear the cost from the loss of property, theft, or replacement of damaged appliances.
- Auto Insurance
Auto insurance is one that is taken out on a car or any motor vehicle (truck, motorcycle, etc.) to help cover the cost for damages caused to that vehicle, to the driver, or even to other pedestrians on the road.
- Car Insurance
Car insurance is a car owner’s protection against the expenses involved in repairing a car or even the medical bills accrued from a car accident. Car insurance can also be considered auto insurance, in which case, it would cover other types of vehicles.
Apart from life insurance and general insurance covers, there are also some unique cases like pet insurance or the learners insurance that an individual can also apply for. These types are not mainstream and are thus largely unpopular.
With the little information written above, you are now aware of what it means to have insurance, your obligations to the insurance provider, and your expectations from them. You can also see that there are a lot of insurance covers out there and lots of insurers too. This means our list of authentic insurance companies and the reviews accompanying them at Allreviews would do you a world of good when picking yours.