An Insight On Types Of Insurance

Insurance is a financial protection taken to shield individuals from financial losses related to different situations. It works under the principle of sharing losses. Those who wish to take up an insurance cover will have to agree to make fixed payments (premiums) to the insurer (the company offering the insurance cover). The insurer will in turn offer a contract (insurance policy) to the client.

Insurance is available in various forms; for instance, life insurance (L.I) is taken to offer financial aid to a family in case of the demise of its income earner. The health insurance (H.I) aid with payment of medical bills while the fire insurance partly or fully pays for loss of home or property destroyed by fire. These are just a few of the common types of insurance option that people take; nevertheless, insurance is also valid from other forms of possible financial losses.

The company will be legally obligated to pay the policyholder some amount of money known as a claim or benefit. How the company makes sure the insured will get the money is by investing in government securities, bonds, stocks, mortgages, or other income generating ventures. Payment is given based on the premiums collected and the incomes earned for the investments done on the premiums.

How insurance works is, the policyholder trades a particular small loss (the premium) to get a guarantee of payments in the event of a bigger loss. This gives the policyholder room to do business, own and drive a car, own property or a home without worrying of the financial hiccups that later on might arise.

Life Insurance exists in three types namely the Term life insurance, the Whole life insurance, and the Endowment life insurance. People can opt to take any one of the three types; however, most companies that offer L.I combine the 3 to form a singular insurance policy.

  • Term L.I avails claims in situations of the demise of the insured within the covered period as stipulated in the policy.
  • Whole L.I is a lifetime insurance cover for the policyholder.
  • Endowment L.I pays only the face value of the death of the policyholder.

Note that the Endowment L.I is commonly taken as a way of saving money with most policyholders opting for it to be able to avail some financial support for the education or upkeep of their children.

The current rise in health care has greatly pushed for better and adequate health insurance policies. Individuals without a health insurance policy risk dealing with huge financial burdens in case they are serious ill or in a serious accident. Health Insurance will pay partly or fully for the costs of medicines, lab tests, surgery, hospitalization, and other medical care expenses.

H.I is sold as a group or individual policies. Individual H.I is common in a group plan within a person’s work place, and the plan may include the dependents of the policyholder. Individual coverage has slightly higher administrative costs and related expenses, which makes it a bit more expensive than group health insurance.

Health maintenance organizations, various employers, medical service plans, and insurance companies offer individual health insurance. Most companies offering health insurance policies also offer cash benefits (a fixed amount of money medical expenses incurred in during the hospitalization period) to the policyholder.

In some cases, the benefits may not cover the full medical bill, so the policyholder is expected to foot the rest. Individual health insurers offer 4 types of H.I each having its own benefits coverage. The four types are:

  1. The Hospital Expense Insurance
  2. The Outpatient Expense Insurance
  3. The Surgical Expense Insurance
  4. The Major Medical Expense Insurance
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