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How does Insurance Policy Work? Types and Much More

What is insurance policy? Insurance is a legal arrangement between two parties i.e. the insurer and the insured. In this the insurance provider agrees to fix the insured’s damages on the case of the insured contingency.

How does Insurance Policy Work? Types and Much More

The incident that triggers a loss is contingency. It could be the policyholder’s death, or property damage/destruction. It is called a contingency, since there is doubt about the event’s occurring. The policyholder charges a premium in exchange for the insurer’s guarantee.

How Does Insurance Work?

The insurer and the insured receive a legal insurance plan, which is called the insurance policy. The insurance policy includes descriptions of the terms and situations in which either the insured person or the nominees will be paid out the insurance sum.

Insurance is a way to protect yourself and your family against financial loss. The rate for a broad insurance cover is usually much less in terms of money charged. The insurance provider is taking this risk by offering a large cover with a low premium because very few insured individuals actually end up claiming the policy. With this reason you get insurance at a small price for a big sum.

Any person or firm may receive insurance from an insurance provider, but the insurance company’s decision to provide insurance is at its discretion. The insurance company will evaluate the request for a decision on the claim. Insurance firms usually refuse to provide the high-risk applicants with insurance.

How does Insurance Policy Work? Types and Much More

What Are the Types of Insurance?

There are multiple and distinct types of insurance anyone can purchase according to his/her area of interest. Nonetheless, all of the types of insurance can be categorize and arranged into three broad categories. Let’s shed some light upon those forms.

♦ Life Insurance

Life insurance is insurance for your life as the name suggests. You purchase life insurance to ensure that your dependents are financially secured in case of your unexpected passing. Life insurance is particularly relevant if you are your family’s primary breadwinner, or if your family is heavily dependent on your income. Under life insurance, the family of the policyholder shall be compensated financially in the event the policyholder expires during the policy term.

♦ Health Insurance

Health insurance is paid to offset the cost of expensive services. Different forms of health insurance plans cover a variety of conditions and diseases. You will purchase both a general health insurance policy and individual disease plans. The premium paid to a health insurance policy usually covers costs of treatment, hospitalization, and medication.

♦ Car Insurance

A car insurance policy is an important policy for any car owner in present era. This insurance protects you against untoward events such as accidents. In addition, some policies compensate for damage to your car during natural calamities such as floods or earthquakes. This also protects third party responsibility if other car owners have to face damages.

♦ Education Insurance

The child education insurance is equivalent to a life insurance policy and has been developed primarily as a saving device. An education policy can be a perfect way to have a lump sum of money when your child hits the age of higher education and receives college admission (18 years and older). Then, this fund can be used to pay for higher education expenses for your child. Under this policy, the child is the life guaranteed, or the fund holder, while the policy owner is the parent/legal guardian.

♦ Home Insurance

We all dream to own our own houses. Home insurance can help cover loss or damage caused to your home by accidents such as fire and other natural or hazardous calamities. Home insurance covers other events such as storms, earthquakes etc.

You can buy an insurance policy offline as well as online, whether it be life insurance, health insurance or general insurance. Just like there are insurance brokers who can help you purchase a policy, so there are websites from which you can buy a policy. Make sure you have done your analysis before choosing an insurance policy and investing in it.

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