By Srabon Nath
Insurance may seem like something that is just an extra burden on your income and really
doesn’t help you. And while it may be true that you are paying money monthly for a service that
you might only require once or twice in your lifetime, insurance is essential for planning for the
long term.
But what really is insurance and how does it work? There are many different types of insurance and they each have their own uses. Insurance is when an entity, usually an insurance company, will give you a policy that dictates the amount of money that you are required to pay in specific time periods (usually every month). And from the company’s end, you will receive a certain level of financial protection from financial loss, property damage, or for damage to a third party. The way that this works is that the money that is collected from you and other individuals is pooled together. In times of emergency, when you require a very large amount of money (that is often not affordable to you), most of those costs are covered by the insurance
company using the money that was pooled together.
The premium that an individual has to pay depends on a lot of factors. One of the main
factors is on how likely the individual is to have an accident, injury, emergency, etc. For
example, for auto insurance coverage, the premium can increase dramatically if the individual
has a past record of accidents or traffic violations. For homeowner’s insurance coverages, one
factor can be where the house is located. If it is located somewhere that is prone to natural
disasters, such as the coast, then the premium is much higher. Also, the premium can depend on
what level of financial protection the individual wants. Higher premiums are required for
covering more serious accidents or injuries.
The main types of insurance can be separated into personal insurance and insurance for a
business. One of the most common types of personal insurance coverage is auto insurance
coverage. Vehicle accidents can happen almost anytime and so it is extremely important to have
some sort of auto insurance. This is why auto insurance is required by law in many states. Auto
insurance coverage can range from covering collision damage, covering public property
damage, and covering for injuries to yourself or a third party. Homeowner's insurance coverage
is also important in case of fires, hurricanes, theft, and any natural disasters that damage your
house. This can be used to repair/rebuild your house or replace stolen/broken items. Health
insurance is where you have to pay a premium in exchange for a certain company to financially
aid a lot of your healthcare costs. Life insurance is when you pay premiums so that if you pass
away, certain people receive a certain amount of money. This is to provide financial security for
your loved ones. Finally, insurance for a business can vary, and usually the purpose for them is to
protect against any risks that a business might face.