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An Introduction to Insurance

Updated on March 8, 2016

Insurance is the way of reducing the financial impact of the occurrence of an unknown risk. Take for instance, running a business involves risk. Risk of damage to imported or exported goods, risk of fire on a Business premises, e.t.c. Although a business owner would usually take reasonable precaution to prevent accidents and risks. Precautions such as having a smoke detector, a fire alarm or a sprinkler system may not be sufficient for business proprietors. Naturally, business owners do not want to bear the financial burden of such accidental occurrences. This is where insurance comes in. Insurance is the process of transferring risk away from yourself and properties to the insurance company through the payment of a premium.

How Insurance Works:
Insurance is a financial product that is sold by an insurance company to safeguard the insured person or thing against future loss or damage. When you acquire an insurance policy, you make regular payments known as premiums. Whenever what you insured is lost, the insurer (Insurance Company) will pay for the loss or damage of the object covered under your insurance policy.

What is an Insurance Premium?:
An Insurance premium is an amount of money an individual or business is required to pay in order to acquire an insurance policy from an insurance company. The premium is considered profit by the insurance company however it also represents liability in the event that what is insured suffers damage or accident.

Types of Insurance:

1. General Liability Insurance:
A General liability insurance policy is very flexible. It can apply to all types of businesses even home based businesses. The insurance policy will be responsible for any damage caused by a business owner, his employees or any of his products and services to a third party.

2. Property Insurance:
A property insurance is a type of insurance policy that covers personal or business property like tools, office equipment, computers among other types of properties. Purchasing a property insurance policy will save the property owner from the financial consequences of fire, vandalism, theft, e.t.c.

3. Business Owner's Insurance Policy:
A business owner's insurance policy contains all the required coverage needed by a business owner. The policy usually includes, business interruption coverage, business property coverage and liability insurance. A business owner's insurance policy is usually determined on specific basis. That is, the type of business being run by a business owner will determine the types of coverage that would be included in the policy.

4. Auto Insurance:
An auto insurance is a type of insurance policy purchased by vehicle owners to transfer the financial consequences of an auto accident to an Insurance Company. Instead of bearing the cost of an auto accident, an insured person will pay annual premiums to an insurance company. The insurance company in turn will be responsible for costs associated with vehicle damage or auto accident.

5. Workers Compensation Insurance:
Workers compensation insurance takes care of the medical bills of employees who are injured on the job. This insurance also provides wage replacement benefits to employees who are injured on the job. To enjoy a Workers Compensation Insurance, the employee must give up the right to sue his employer for any accident that occurs on the job. Workers Compensation Insurance is essential for a business owner because it protects the business owner from legal complications.

6. Life Insurance:
Life Insurance is an insurance policy that pays monetary benefits to the beneficiaries of the insured person upon his death. On the otherhand, the insured person's medical bills would be borne by the insurance company in the case of an accident or serious illness. However, the insurance policy will be null and void in the case that the insured person commits suicide. There are three factors that influences the amount a person has to pay to purchase an insurance policy. One of them is the age of the insured person. The higher the age of the insured person, the higher the premium. Another factor is the current health of the insured person. If the health of the insured person is bad, then the premium will be higher. Finally, the lifestyle of an insured person will also influence the amount to be paid as premium for life insurance. If the person has a dangerous/hazardous job or lifestyle, the premium will usually be higher.

7. Professional Liability Insurance:
This insurance policy is also known as errors and omission insurance. This policy provides coverage for damages that may accrue due to the improper rendering of professional services. Professional liability insurance is only available for professionals such as lawyers, accountants, real estate agents, auditors, e.t.c

8. Homeowner's Insurance:
Homeowner's Insurance is an important insurance policy for home owners. This is a type of insurance that provides for damage to the home. It can also be extended to provide for damage to properties within the home.

What is an Insurance Quote?:
An insurance quote is an estimate of the premium you will pay to an Insurance Company for a particular type of coverage. Quotes are variable, they are subject to change depending on the information that is supplied when the quote is calculated. There are two ways to get an insurance quote. You can either get one online. It usually takes an average of fifteen minutes to get an insurance quote online. This time will be spent answering various questions and supplying the information that would be needed to calculate the insurance quote. Another way to get a quote is to call an insurance agent. When you call an insurance agent, you spend between five and ten minutes supplying information to the agent. Then the agent calls you back with the quote. Insurance quotes can be obtained for each type of insurance policy. You can get auto insurance quotes, life insurance quotes, Homeowner's Insurance quotes among other types of insurance quotes. The benefit of getting an insurance quote is that you can compare estimates for premiums from several insurance companies and choose the cheapest premium available. It is usually advisable to get various insurance quotes before buying an insurance policy.


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