What is an insurance?
An insurance is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company.
What are the different types of insurance?
- Auto insurance – Auto insurance protects the policyholder against financial loss in the event of an incident involving a vehicle they own, such as in a traffic collision.
- Property coverage – for damage to or theft of the car. You can read more about my story with property coverage during the COVID-19 pandemic.
- Liability coverage – for the legal responsibility to others for bodily injury or property damage.
- Medical coverage – for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses
- Gap coverage – covers the excess amount on your auto loan in an instance where your insurance company does not cover the entire loan. Depending on the company’s specific policies it might or might not cover the deductible as well.
- Health coverage – Health insurance policies cover the cost of medical treatments. It is normally funded through taxation.
- Disability insurance – policies provide financial support in the event of the policyholder becoming unable to work because of disabling illness or injury. It provides monthly support to help pay such obligations as mortgage loans and credit cards.
- Casualty insurance – Casualty insurance insures against accidents, not necessarily tied to any specific property.
- Crime coverage is a form of casualty insurance that covers the policyholder against losses arising from the criminal acts of third parties.
- Terrorism insurance provides protection against any loss or damage caused by terrorist activities.
- Life insurance – it provides a monetary benefit to a decedent’s family or other designated beneficiary, and may specifically provide for income to an insured person’s family, burial, funeral and other final expenses.
- Crop insurance may be purchased by farmers to reduce or manage various risks associated with growing crops.
- Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property. Most ordinary policies do not cover earthquake damage.
- Fidelity bond is a form of casualty insurance that covers policyholders for losses incurred as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees.
- Landlord insurance covers residential or commercial property that is rented to tenants. It also covers the landlord’s liability for the occupants at the property.
- Marine insurance and marine cargo insurance cover the loss or damage of vessels at sea or on inland waterways, and of cargo in transit, regardless of the method of transit.
- Renters’ insurance – it is a policy that provides some of the benefits of homeowners’ insurance, but does not include coverage for the dwelling, or structure, with the exception of small alterations that a tenant makes to the structure.
- Supplemental natural disaster insurance covers specified expenses after a natural disaster renders the policyholder’s home uninhabitable. Periodic payments are made directly to the insured until the home is rebuilt or a specified time period has elapsed.
- Surety bond insurance is a three-party insurance guaranteeing the performance of the principal.
- Mortgage insurance insures the lender against default by the borrower. Mortgage insurance is a form of credit insurance, although the name “credit insurance” more often is used to refer to policies that cover other kinds of debt.
The list is certainly not exhaustive. If you wish to learn more about other types of insurance, you can visit the linked source from Wikipedia below.
Should you get an Insurance?
- Insurance Keeps Commerce Moving
In the days after the 9/11 attacks, there were many worries about coverage. Acts of war are not covered by insurance. Was terrorism an act of war? The big question was, How would the 9/11 attacks be classified? Fortunately, the insurance industry decided the attacks were not an act of war.
- Lenders Require Insurance – This reason is tied to No. 1. Lenders require that you have insurance. Without coverage, your winning business model can’t get the funding it needs to take its first step, or your established business model can’t get the funding to evolve and better compete.
- It is Compulsory in Some States – It is important because sometimes it’s the law! A great example of this is auto insurance. The policy helps mitigate the risk of life on the road (of which there are many!).
- It Grants Peace of Mind – it provides another intangible: peace of mind. Insurance is the required safety net that lets entrepreneurs explore opportunity.
- Insurance Ensures Family and Business Stability – Insurance is a safety net for when risks go wrong. Life insurance can support the life of a family, should a member be lost. It’s similar for a business. Should a key member or piece of equipment go out of commission, the business can carry on, thanks to insurance.
- It Protects the Small Guys – When you look at your industry, you see the “big guys” and the “small guys.” If a risk goes wrong, the big guys will be able to survive. They can take a hit. But the little guys can’t take a hit. As a result, they are more risk averse, and in some cases, they sell out to the big guys. If enough little guys leave the industry (and one big guy swallows them up), you’re left with a monopoly.
- It is the Right Thing to Do – A sobering example of insurance in action is the West Fertilizer Co. explosion in Texas this spring. The explosion did $100 million in damage to the community, including schools and hospitals. The fertilizer company had only $1 million in general liability coverage.
10 Insurance Facts that you probably did not know
No. 1: Your home insurance probably covers volcano and meteor damage
You may know that your home insurance doesn’t protect you from flood damage, but you may not fully appreciate all that it does protect you from. It policies usually cover damage from volcanoes and even meteors, for example. Like flooding damage, though, earthquake damage is usually not covered. It’s best to read your policy closely, or talk with your agent, to find out exactly what is and isn’t covered, so that you can decide whether you want to add any other coverage, such as for earthquakes. (Earthquakes can occur in unexpected places — a very big one happened long ago in Missouri.)
No. 2: Reducing unnecessary emergency room visits can bring healthcare costs down a lot
Many visits to emergencies are not truly emergencies: People going there may instead be treated by their primary physicians or perhaps an urgent-care facility. Emergency rooms are costly: “It is estimated that more than $18 billion could be saved annually if those patients whose medical problems are considered ‘avoidable’ or ‘non-urgent’ were to take advantage of primary or preventive healthcare and not rely on ERs for their medical needs,” according to the folks at Debt.org.
No. 3: Your credit score can significantly influence your insurance costs
You probably know about credit scores that influence the mortgage interest rates you’re offered, but you may not realize that there are “credit-based insurance scores” that influence the insurance premiums you’re quoted — and sometimes significantly.
No. 4: Home insurance policies often prohibit certain dog breeds
Many home insurance policies often prohibit you from having certain kinds of dogs as pets — because they can potentially cause problems. Some 4.5 million people are bitten by dogs annually, and about 20% of dog bites require medical attention, according to the Centers for Disease control and Prevention. All that costs homeowner insurers a lot — in 2017, they reported $686 million in liability claims related to dog bites and other dog-related injuries.
No. 5: Car insurance for male teenagers can be surprisingly costly
College costs aren’t all you’ll face as your teenagers start driving: You’ll also need to have them covered by car insurance, and that can be quite expensive. The folks at insurance.com have noted, “A parent adding a male teen to their policy can expect their new rate to run as high as $6,186, and in some cases 227% higher than insuring an adult driver alone, and a teen buying their own policy can be even more expensive.”
No. 6: Some employers offer healthcare for parents of workers
Many Americans get employer-sponsored healthcare — for themselves, or themselves and their spouses, or themselves, their spouses and their children. That’s a given. In China, though, Starbucks has taken employer-sponsored health insurance a step further, offering to cover the parents of workers. It’s limited to workers who have been with the company for at least two years, and it provides critical-illness coverage for some 30 illnesses to parents who are younger than 75 and who live in China.
No. 7: Many Americans think the Affordable Care Act and Obamacare are different
The launch of the Affordable Care Act, also known as Obamacare, was met with vociferous opposition from many Americans, along with strong support from many others, and many Republicans have been trying to eradicate or weaken it for years, with some success.
No. 8: Obamacare is doing more than making healthcare more accessible
Another thing that many don’t quite appreciate about the Affordable Care Act is that it’s triggering big changes in the American healthcare system. With millions more people covered, many of whom are in poor health and needing a lot of care, the industry has been undergoing a shift from a fee-for-service model to a value-based model. The fee-for-service model has doctors and the healthcare industry making money every time they provide a service to you.
No. 9: Insurance is thousands of years old
Indeed, the first appearance of insurance in history reportedly happened in China, around 3000 B.C. Merchants who relied on ship transport of goods were at risk of losing merchandise in shipwrecks. So some banded together and distributed their goods across a number of ships, so that one shipwreck would hurt each of them a bit but wouldn’t deliver a total loss to anyone.
No. 10: America’s insurance history predates the American revolution
You may not have heard of the Philadelphia Contributionship, but it’s America’s oldest, continuously active insurance company, founded in 1752 by Benjamin Franklin and others