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Insurance :Learn What is Insurance, Insurance Types

Updated on April 11, 2015
Insurance: Protection from Risk
Insurance: Protection from Risk

What is Insurance?

What is Insurance ? Insurance is basically a transfer of risk from one entity to another. This usually happens in exchange of money, it is called payment. Insurance is a type of risk management. It was used primarily to hedge in which risk is uncertain and contingent.

Insurance involves transferring risk from customer and paying the insurance amount to the insurer. If a person wants to purchase a policy and covered under insurance, then he or she needs to purchase the policy according to the current situation. The insurer has to pay certain amount periodically to be covered.

Insurance is considered to have brief history. In earlier times, insurance was present in some different form may be for risk of livestock or agricultural products. It eventually turns into modern insurance industry. Eventually Insurance industry grown up and nowadays all assets you can think are in need of insurance.

Are You Covered ?

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What is Insurance ? Insurance terminology

As we know, Insurance is a kind of protection from some uncertain risk. One can get insurance depending upon the risk assessment and other terms.

Insurance companies are the company who provides risk assessment and protection against certain kinds of risk in terms of receiving payment.

Insurance companies are also known as an insurer. Insurer sells insurance to the insured or policyholder. The policyholder is usually individual or companies.

The insurers charge insured certain amount of money depending upon the insurance type, policy type, risk associated and certain other factors. This amount of money called premium. Insured pay the premium amount to the insurer to keep insurance coverage on.

Upon buying the insurance, insured receive a contract, which is called Policy. The policy holds all the terms and conditions for the particular insurance.

Most insurances are indemnity contracts. Indemnity contracts are considered to those insurances in which the loss can be measured in some amount of money.

Insurance Types

There are many types of insurance available but we are going to consider some of the important types here.

1) Health Insurance: Health insurance provides the protection against the health risk and other medical expenses. It covers different types of loss from accident, disability benefits, accidental expenses and other medical expenses. Dental and eye insurance are also a part of Health insurance but it is purchased separately.

2) Life Insurance: Life insurance is also known as Life assurance. In life insurance, the insurer promise insured that upon the death of the insured person, the insurer will pay some defined amount of money to the beneficiary. There are many different types in life insurance such as whole life, death, Loan for Terminally Ill (LTI), universal life, variable life etc.

3) Auto Insurance: If you own a vehicle, then auto insurance is mandatory for you. There are two types of auto insurance full coverage and Liability coverage (Third party insurance).It provides insurance for all the vehicles including cars, trucks, motorcycles and RVs. The amount of premium depends on vehicle condition and terms of insurance. Auto insurance provides coverage for auto damage in case of an auto accident. It also provides expense for auto repair.

4) Property Insurance: Property insurance provides insurance against property risk, theft, burglary, fire, some weather damage etc. It comes in different forms such as it can be bought for property risk assurance.

5) Business Insurance: Business insurance is basically for small and large organizations.

There are some other sub types of insurance are there as well such as liability insurance, Gap Insurance, Burial Insurance, closed community self-insurance, business interruption insurance, collateral protection insurance (CPI), defense base act (DBA) insurance, expatriate insurance, kidnap and ransom insurance, livestock insurance, pet insurance, title insurance, travel insurance, tuition insurance, interest rate insurance and divorce insurance.

15 Most Crazy Celebrity Insurance Policies

  1. Heidi Klum's Legs: $2.2 million
  2. Thailand Riot Insurance: $10,000 Per Tourist
  3. Aquafresh White Strips: $10,000,000 policy on American Ferrera's teeth
  4. Dolly Parton's Breasts? A whopping $300,000 a boob
  5. Tom Jones' Chest Hair: $7,000,000
  6. Paul Hucker Insures Himself For $1.5 Million Against Abduction, Impregnation And Consumption By Aliens
  7. Lloyd's Offers Hole-In-One Insurance For Golfers: $50,000
  8. Jennifer Lopez has a $27 million insurance policy on her butt
  9. $151 million for David Beckham against a career-threatening injury
  10. Taco Bell took out insurance in case a falling piece of the MIR Space Station hit a promotional bulls eye In The Ocean. If it worked, everyone in America would get a free taco.
  11. British male stripper named Frankie Jakeman insured his penis for $1.6 million
  12. British food critic Egon Ronay keeps his taste buds safe for $400,000.
  13. Rod Stewarts' voice? $6 million in insurance.
  14. The Rolling Stones' Keith Richards insured his middle finger to the tune of $1.6 million
  15. David Lee Roth's semen was insured for $1 million back in the 1980s.

Insurance types

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Insurance Companies

Insurance companies can be divided into main two groups: Life insurance companies and non-life insurance companies. Life insurance companies mostly sell life insurance, annuities and pension policies. Non-life insurance companies usually are for everything else then life insurance products. Insurance companies provides insurance in exchange of certain amount of insurance payments. Most insurance companies also have their banking branch by which they invest their collected amounts.

There are many insurance companies available for an individual as well for businesses. There are many different kinds of insurance as we discussed and companies provide those insurances. Some insurance companies are specialist in certain kind of insurance. State Farm, Allstate, Geico, Blue Cross Blue Shield, Humana, United One, Progressive, Liberty Mutual, AIG, Farmers insurance, Cigna, Aetna, united health care, assurance, Met Life, Uni care, Anthem, Travelers and AAA are some of the top insurance companies.

In Summary...

Insurance it is not a luxury but it is a shared responsibility where an insured person pays insurance installment to protect their assets. Some countries provide health insurance for their citizens like Canada while some other countries wants their citizens to buy insurance such as US. Insurance usually consider provide safety for your assets. At the end,it is good to stay insured and feel protected but it is again debatable. I will try to put together my thought about this debate in a separate article. Hope this article provides you some basic information about insurance.

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