What is Insurance?

Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of potential financial loss. Ideally, insurance is defined as a promise of reimbursement in the case of loss; paid to people or companies so concerned about hazards that they have made prepayments to an insurance company.

It’s a written contract or certificate of insurance; "you should have read the small print on your policy". A contract in which one party agrees to pay for another party's financial loss resulting from a specified event (for example, a collision, theft, or storm damage). Lease agreements generally require that you maintain vehicle collision and comprehensive insurance as well as liability insurance for bodily injury and property damage.

Types of insurance:

In North America, you get insurance products like car insurance, home insurance, pet insurance, life insurance, travel insurance, health insurance and business insurance etc. motor insurance covers both the driver of the car and the car itself. Health insurance covers medical bills incurred due to illness or accidents. Travel insurance covers certain losses such as medical expenses, loss or theft of personal belongings while traveling, traveling delay etc. pet insurance will cover your pet’s medical expenses, loss or death. Home insurance covers your house and in some cases its contents. Damages arising due to natural calamities like earthquake, floods etc are excluded. You are also not supposed to get the assured sum when the damage caused was an ‘act of god’ or a result of war. Business insurance covers losses that you may incur in your business.

Why do you need Insurance?

The type of risk involved to the risk determines how much will be the premium. For example, if you have bought a home insurance and your house is in good shape and situated near a fire station, the insurance company will charge you lower premiums. Risk factor therefore determines the premium amount.

Auto insurance is required by law in all states and protects you by paying for damage or injury you cause others while driving your car; damage to your car or injury to you or your passengers in your car from a crash; and certain other occurrences such as theft and vandalism. Without insurance, you risk having to pay the full cost of any harm you cause others with your vehicle. In case of accident what if you have to pays for physical injury damage and property damage to others for which you are responsible? Physical injury damages include medical expenses, lost wages and pain and suffering. Property damage includes damaged property and loss of use of property. State laws usually order minimum amounts, but higher amounts are accessible and usually recommended. That is when car insurance comes in handy to prevent from the hassle and paying for heavy damage.

Health insurance is an option that could provide you this. Given the way health care costs have risen; many families have gone bankrupt paying the bills for a sick person in the family. Some are fortunate to have medical insurance cover either by the employer or have cover by parents or relatives medical insurance policies others are not so fortunate.

Life insurance policies help the insured during a lifetime and after. At retirement it provides a pension and provisions for those dependent on the income. During a lifetime it can provide emergency funds for illness, medical expenses and education.

Travel insurance and Group Health Insurance are options that you can choose because this is the most likely scenarios when accidents happen. When you travel or when a group is going on vacation or camps. This is in case your cover by medical insurance is too less.