What Are the Types of Life Insurance?

Often we as consumers just nod listened insurance agents who offer their products. Most agents offer the products it sells, The problem is not the products we need. consumers often do not understand and do not really understand what exactly insurance products he needed.

Basic knowledge about the types of life insurance that sometimes create confusion. There are still many consumers who can not distinguish between traditional products with non-traditional products. While the explanation of the agents also sparingly only, not really meet the thirst of curiosity of the customers. Instead, customers also need more ask and have knowledge about insurance.

About the types of insurance, type of insurance is divided into two major types, traditional insurance and nontraditional insurance.
Traditional insurance is divided into 3 types.

1. Insurance Termlife (futures)
2. whole life
3. and endowment

It is better to take a moment to understand further the kinds of insurance.

A. Traditional insurance

1. TERMLIFE INSURANCE

   Term insurance provides protection only within a limited period only. The protection can be very short, less than two hours or as long as 20 years. Typically, there is a time limit of insurance protection. In addition, if there is no risk, the insurance money is not returned or forfeited.
   
   This type of insurance has the cheapest premiums on the insurance. Money coverage can be large, reaching billions with a relatively low premium. Type of term life insurance has no cash value. So, if at the time of expiry of the contract of insurance the insured is still hale and hearty, while the contract expires so no money is given to the insured.
   
   Many people do not like this product because no money is returned when the contract expires if the customer is still in good health. Strange indeed, there are people who are not grateful for having blessed with health and longevity. Actually the type of term life insurance is could be analogous to hiring a security guard for one night to keep the home with abundant possessions. If a theft does not happen that night, if we can pull back the salaries of security guards the next morning? Should not we be grateful for our homes safe?
   
   Due to a large the sum assured, to buy this kind of insurance premium is not too easy. Most insurance companies that sell this type of insurance requires customers to undergo a medical examination before such a policy with coverage of $ 2 billion.
   
   If it does not pass inspection, customers are not allowed to purchase this type of insurance. Or it may be reduced to the sum assured less.
   
   The insurance premium is much smaller than the premium to be paid if you buy unit-linked products. Many financial planners recommend that if you buy this type of insurance product should be accompanied by buying mutual funds. Because, when the insurance period ends and the healthy insured no the sum assured ??given.
   
   So that when combined with the mutual fund, insurance fund at the end of the development of the mutual fund investment was plenty. The combination of term insurance and mutual funds, will result in a much higher investment than buying units link. By paying the same premium, the sum assured is also much greater.
   
   One thing that is needed is the discipline to save money every month in a mutual fund each month in order to obtain maximum benefit and results

2. WHOLE LIFE INSURANCE

   This insurance contains the value of savings. The period of protection any longer, up to 99 years. This insurance is called a refinement term life insurance that has no cash value. still remember that in the lifeterm insurance that if there is no risk of death, at the end of the contract term insurance customers do not get anything?
   
   Well, to satisfy customers who yammer about term insurance, so in whole life insurance, when the contract expires and the insured is still hale and hearty, there is cash value given. The risk, the premium paid is more expensive because of the risk of inevitable claims. There is rarely a healthy person up to the age of 99 years right?
   
   Cash value of whole life policy can be used as collateral for loans, and there is a bonus dividend of the company for the whole life policy holders. Moreover, if it can not pay the premiums, the policyholder may withdraw funds from the cash value of this. This feature does not exist on the type of term life insurance.
   
   Next question, how much money will I get when the insurance period ends later? Usually insurance agents illustrated by the age of a few tens of years the funds will come out a few hundred million. remember, do not be happy first by the illustrations that show the number of millions. That figure looks great at the moment, while inflation continues to erode the value of money and in time comes, a few decades from now, as much as it really is not that big.
   
   The reason, it was just developed a yield of 4 percent per year. Much lower than the interest rates on the market. Yields of it still has not cut costs and taxes.
   
   On the other hand, the real inflation rate reached 12 percent. So the whole life insurance cash value will be eroded by inflation, and the value is not as illustrations presented to prospective clients. It may be that, when the policy matures, the cash value becomes very small.
   
   Cost of the premium to be paid to obtain coverage of Rp 1 billion, for example, will be far greater than the cost of the premium to be paid if you buy term insurance. How is it different, it can be seen in the literature on the calculation of insurance premiums.

3. ENDOWMENT INSURANCE

   This type is like as term-insurance also as savings.
   
   This product is very popular before the advent of unit-linked products. the forms of endowment insurance is very diverse. In addition to having a cash value, there is also a periodically funds expended prior to the insurance contract expires. These funds out periodically eg 3 years or 5 years. For example, as the issuing insurance fund education when the child was 5 years old for kindergarten entry fee, for elementary school and beyond.
   
   Unfortunately, endowment insurance premiums are much more expensive than term insurance premiums and also whole life insurance.
   
   Lately, these endowment type insurance prestige faded with the rise of unitlink products. Moreover, because the always give bonuses, the cost of endowment insurance was be burden the insurance companies.

B.NON-TRADITIONAL INSURANCE

The type of Non-traditional Insurance is only one : link unit.

Unit linked insurance is with two pockets, pouches for protection and pouches for investment . The premiums are paid partly used to pay for protection and some are placed in mutual funds in the form of unit-linked.

Policyholders will be asked to choose where to put their investments, whether in equity funds, mixed funds, fixed income funds, or money market.

Unit linked closely linked to the capital market. This product is quite complex and not easily understood. Unfortunately, many insurance agents are less explain exactly subject product. When the stock market goes down, the value of the unit will also link down. So often projections that given was missed from reality.

In some insurance companies that sell unit-linked products, others do not give details on the performance of the link units from month to month. unit link placed on any stock, many customers do not find out about this. Indeed, there are some insurance companies that includes the performance of the unit link on his site that can be easily accessed by its customers.

If you compare placing funds the same with a portion that is placed in unit-linked, meaning is reduced by the cost of premiums, by being placed directly in mutual funds, then the result will be much greater if they are placed in mutual funds.

Most insurance companies invest your fund entirely on unit-linked products in year five. For the first year to fifth, only some of which are placed in the unit link. Such as 0 percent in the first year, for the first year out of funds to pay the cost of acquisition or agent bonus. The second year of the investment share rose to 20 percent, to 40 percent in the third year and fourth year of the new 80 percent in the fifth year to 100 per cent is placed on the unit link.

Cost of the premium to be paid also large compared to the traditional type of insurance premiums. Protection value only slightly, at most, approximately USD 250 million. If you are calculating your insurance needs and the the sum assured of Rp 250 million is inadequate, consider taking other types of insurance.

The problem is, if you need the protection of Rp 1 billion to pay the premium unit link is very high. Do not get because it has not been able to afford unit-linked premiums that offered by agent then lowering the sum assured so you are having underinsure.

Policyholders should really pay attention to and study the product carefully and absorb the information so that not mistake to bought. It issued a large amount of money, got pertanggungan which is less than the investment needs and get results that are not optimal.

The positive of unit-linked insurance is you can discipline to invest on a regular basis, either monthly or yearly investment because payments are charged together with the payment of premiums.

Well, after knowing the types of insurance, choose one that best fits your financial goals. The first, Calculate insurance needs, and then define the product.

Types of Insurance You Need to Know

Insurance what will we choose and we need, first identify the types of insurance, then determine type of insurance that you need.
The following are the types of insurance you need to know :

1. 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.
   Coverage typically includes:
   
   1. Property coverage, for damage to or theft of the car;
   2. Liability coverage, for the legal responsibility to others for bodily injury or property damage;
   3. Medical coverage, for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.
   Most countries, such as the United Kingdom, require drivers to buy some, but not all, of these coverages. When a car is used as collateral for a loan the lender usually requires specific coverage.
   

   • Gap insurance

     
     
     Gap insurance covers the excess amount on your auto loan in an instance where your insurance company does not cover the entire loan. Depending on the companies specific policies it might or might not cover the deductible as well. This coverage is marketed for those who put low down payments, have high interest rates on their loans, and those with 60 month or longer terms. Gap insurance is typically offered by your finance company when you first purchase your vehicle. Most auto insurance companies offer this coverage to consumers as well. If you are unsure if GAP coverage had been purchased, you should check your vehicle lease or purchase documentation.

2. Health Insurance

   
   
   Health insurance policies cover the cost of medical treatments. Dental insurance, like medical insurance protects policyholders for dental costs. In the US and Canada, dental insurance is often part of an employer's benefits package, along with health insurance.

3. Accident, sickness and unemployment insurance

   
   
   
   • 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. Short-term and long-term disability policies are available to individuals, but considering the expense, long-term policies are generally obtained only by those with at least six-figure incomes, such as doctors, lawyers, etc. Short-term disability insurance covers a person for a period typically up to six months, paying a stipend each month to cover medical bills and other necessities.
   • Long-term disability insurance covers an individual's expenses for the long term, up until such time as they are considered permanently disabled and thereafter. Insurance companies will often try to encourage the person back into employment in preference to and before declaring them unable to work at all and therefore totally disabled.
   • Disability overhead insurance allows business owners to cover the overhead expenses of their business while they are unable to work.
   • Total permanent disability insurance provides benefits when a person is permanently disabled and can no longer work in their profession, often taken as an adjunct to life insurance.
   • Workers' compensation insurance replaces all or part of a worker's wages lost and accompanying medical expenses incurred because of a job-related injury.

4. Casualty Insurance

   
   
   Casualty insurance insures against accidents, not necessarily tied to any specific property. It is a broad spectrum of insurance that a number of other types of insurance could be classified, such as auto, workers compensation, and some liability insurances.
   
   • Crime insurance is a form of casualty insurance that covers the policyholder against losses arising from the criminal acts of third parties. For example, a company can obtain crime insurance to cover losses arising from theft or embezzlement.
   • Political risk insurance is a form of casualty insurance that can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions could result in a loss.

5. Life Insurance

   
   
   Life insurance 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. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity. In most states, a person cannot purchase a policy on another person without their knowledge.
   Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies, are regulated as insurance, and require the same kinds of actuarial and investment management expertise that life insurance requires. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance.
   Certain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities and endowment policies, are financial instruments to accumulate or liquidate wealth when it is needed.
   In many countries, such as the US and the UK, the tax law provides that the interest on this cash value is not taxable under certain circumstances. This leads to widespread use of life insurance as a tax-efficient method of saving as well as protection in the event of early death.
   In the US, the tax on interest income on life insurance policies and annuities is generally deferred. However, in some cases the benefit derived from tax deferral may be offset by a low return. This depends upon the insuring company, the type of policy and other variables (mortality, market return, etc.). Moreover, other income tax saving vehicles (e.g., IRAs, 401(k) plans, Roth IRAs) may be better alternatives for value accumulation.
   

   • Burial insurance

     
     
     Burial insurance is a very old type of life insurance which is paid out upon death to cover final expenses, such as the cost of a funeral. The Greeks and Romans introduced burial insurance circa 600 CE when they organized guilds called "benevolent societies" which cared for the surviving families and paid funeral expenses of members upon death. Guilds in the Middle Ages served a similar purpose, as did friendly societies during Victorian times.

6. Property Insurance

   
   
   Property insurance provides protection against risks to property, such as fire, theft or weather damage. This may include specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, inland marine insurance or boiler insurance. The term property insurance may, like casualty insurance, be used as a broad category of various subtypes of insurance, some of which are listed below:
   
   • Aviation insurance protects aircraft hulls and spares, and associated liability risks, such as passenger and third-party liability. Airports may also appear under this subcategory, including air traffic control and refuelling operations for international airports through to smaller domestic exposures.
   • Boiler insurance (also known as boiler and machinery insurance, or equipment breakdown insurance) insures against accidental physical damage to boilers, equipment or machinery.
   • Builder's risk insurance insures against the risk of physical loss or damage to property during construction. Builder's risk insurance is typically written on an "all risk" basis covering damage arising from any cause (including the negligence of the insured) not otherwise expressly excluded. Builder's risk insurance is coverage that protects a person's or organization's insurable interest in materials, fixtures and/or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from an insured peril.^[22]
   • Crop insurance may be purchased by farmers to reduce or manage various risks associated with growing crops. Such risks include crop loss or damage caused by weather, hail, drought, frost damage, insects, or disease.^[23]
   • 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 home insurance policies do not cover earthquake damage. Earthquake insurance policies generally feature a high deductible. Rates depend on location and hence the likelihood of an earthquake, as well as the construction of the home.
   • 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.
   • Flood insurance protects against property loss due to flooding. Many insurers in the US do not provide flood insurance in some parts of the country. In response to this, the federal government created the National Flood Insurance Program which serves as the insurer of last resort.
   • Home insurance, also commonly called hazard insurance or homeowners insurance (often abbreviated in the real estate industry as HOI), provides coverage for damage or destruction of the policyholder's home. In some geographical areas, the policy may exclude certain types of risks, such as flood or earthquake, that require additional coverage. Maintenance-related issues are typically the homeowner's responsibility. The policy may include inventory, or this can be bought as a separate policy, especially for people who rent housing. In some countries, insurers offer a package which may include liability and legal responsibility for injuries and property damage caused by members of the household, including pets.^[24]
   • Landlord insurance covers residential and commercial properties which are rented to others. Most homeowners' insurance covers only owner-occupied homes.
   • 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. When the owner of the cargo and the carrier are separate corporations, marine cargo insurance typically compensates the owner of cargo for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier or the carrier's insurance. Many marine insurance underwriters will include "time element" coverage in such policies, which extends the indemnity to cover loss of profit and other business expenses attributable to the delay caused by a covered loss.
   • 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.
   • Terrorism insurance provides protection against any loss or damage caused by terrorist activities. In the US in the wake of 9/11, the Terrorism Risk Insurance Act 2002 (TRIA) set up a federal Program providing a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism. The program was extended until the end of 2014 by the Terrorism Risk Insurance Program Reauthorization Act 2007 (TRIPRA).
   • Volcano insurance is a specialized insurance protecting against damage arising specifically from volcanic eruptions.
   • Windstorm insurance is an insurance covering the damage that can be caused by wind events such as hurricanes.

7. Liability Insurance

   
   
   Liability insurance is a very broad superset that covers legal claims against the insured. Many types of insurance include an aspect of liability coverage. For example, a homeowner's insurance policy will normally include liability coverage which protects the insured in the event of a claim brought by someone who slips and falls on the property; automobile insurance also includes an aspect of liability insurance that indemnifies against the harm that a crashing car can cause to others' lives, health, or property. The protection offered by a liability insurance policy is twofold: a legal defense in the event of a lawsuit commenced against the policyholder and indemnification (payment on behalf of the insured) with respect to a settlement or court verdict. Liability policies typically cover only the negligence of the insured, and will not apply to results of wilful or intentional acts by the insured.
   
   • Public liability insurance covers a business or organization against claims should its operations injure a member of the public or damage their property in some way.
   • Directors and officers liability insurance (D&O) protects an organization (usually a corporation) from costs associated with litigation resulting from errors made by directors and officers for which they are liable.
   • Environmental liability insurance protects the insured from bodily injury, property damage and cleanup costs as a result of the dispersal, release or escape of pollutants.
   • Errors and omissions insurance (E&O) is business liability insurance for professionals such as insurance agents, real estate agents and brokers, architects, third-party administrators (TPAs) and other business professionals.
   • Prize indemnity insurance protects the insured from giving away a large prize at a specific event. Examples would include offering prizes to contestants who can make a half-court shot at a basketball game, or a hole-in-one at a golf tournament.
   • Professional liability insurance, also called professional indemnity insurance (PI), protects insured professionals such as architectural corporations and medical practitioners against potential negligence claims made by their patients/clients. Professional liability insurance may take on different names depending on the profession. For example, professional liability insurance in reference to the medical profession may be called medical malpractice insurance.

8. Credit

   
   
   Credit insurance repays some or all of a loan when certain circumstances arise to the borrower such as unemployment, disability, or death.
   
   • 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.
   • Many credit cards offer payment protection plans which are a form of credit insurance.
   • Trade credit insurance is business insurance over the accounts receivable of the insured. The policy pays the policy holder for covered accounts receivable if the debtor defaults on payment.

9. Other Types Insurance

   
   
   
   • All-risk insurance is an insurance that covers a wide range of incidents and perils, except those noted in the policy. All-risk insurance is different from peril-specific insurance that cover losses from only those perils listed in the policy.^[25] In car insurance, all-risk policy includes also the damages caused by the own driver.
   • Bloodstock insurance covers individual horses or a number of horses under common ownership. Coverage is typically for mortality as a result of accident, illness or disease but may extend to include infertility, in-transit loss, veterinary fees, and prospective foal.
   • Business interruption insurance covers the loss of income, and the expenses incurred, after a covered peril interrupts normal business operations.
   • Collateral protection insurance (CPI) insures property (primarily vehicles) held as collateral for loans made by lending institutions.
   • Defense Base Act (DBA) insurance provides coverage for civilian workers hired by the government to perform contracts outside the US and Canada. DBA is required for all US citizens, US residents, US Green Card holders, and all employees or subcontractors hired on overseas government contracts. Depending on the country, foreign nationals must also be covered under DBA. This coverage typically includes expenses related to medical treatment and loss of wages, as well as disability and death benefits.
   • Expatriate insurance provides individuals and organizations operating outside of their home country with protection for automobiles, property, health, liability and business pursuits.
   • Kidnap and ransom insurance is designed to protect individuals and corporations operating in high-risk areas around the world against the perils of kidnap, extortion, wrongful detention and hijacking.
   • Legal expenses insurance covers policyholders for the potential costs of legal action against an institution or an individual. When something happens which triggers the need for legal action, it is known as "the event". There are two main types of legal expenses insurance: before the event insurance and after the event insurance.
   • Livestock insurance is a specialist policy provided to, for example, commercial or hobby farms, aquariums, fish farms or any other animal holding. Cover is available for mortality or economic slaughter as a result of accident, illness or disease but can extend to include destruction by government order.
   • Media liability insurance is designed to cover professionals that engage in film and television production and print, against risks such as defamation.
   • Nuclear incident insurance covers damages resulting from an incident involving radioactive materials and is generally arranged at the national level. (See the nuclear exclusion clause and for the US the Price-Anderson Nuclear Industries Indemnity Act.)
   • Pet insurance insures pets against accidents and illnesses; some companies cover routine/wellness care and burial, as well.
   • Pollution insurance usually takes the form of first-party coverage for contamination of insured property either by external or on-site sources. Coverage is also afforded for liability to third parties arising from contamination of air, water, or land due to the sudden and accidental release of hazardous materials from the insured site. The policy usually covers the costs of cleanup and may include coverage for releases from underground storage tanks. Intentional acts are specifically excluded.
   • Purchase insurance is aimed at providing protection on the products people purchase. Purchase insurance can cover individual purchase protection, warranties, guarantees, care plans and even mobile phone insurance. Such insurance is normally very limited in the scope of problems that are covered by the policy.
   • Title insurance provides a guarantee that title to real property is vested in the purchaser and/or mortgagee, free and clear of liens or encumbrances. It is usually issued in conjunction with a search of the public records performed at the time of a real estate transaction.
   • Travel insurance is an insurance cover taken by those who travel abroad, which covers certain losses such as medical expenses, loss of personal belongings, travel delay, and personal liabilities.
   • Tuition insurance insures students against involuntary withdrawal from cost-intensive educational institutions
   • Interest rate insurance protects the holder from adverse changes in interest rates, for instance for those with a variable rate loan or mortgage

10. Insurance Financing Vehicles

    
    
    
    • Fraternal insurance is provided on a cooperative basis by fraternal benefit societies or other social organizations.
    • No-fault insurance is a type of insurance policy (typically automobile insurance) where insureds are indemnified by their own insurer regardless of fault in the incident.
    • Protected self-insurance is an alternative risk financing mechanism in which an organization retains the mathematically calculated cost of risk within the organization and transfers the catastrophic risk with specific and aggregate limits to an insurer so the maximum total cost of the program is known. A properly designed and underwritten Protected Self-Insurance Program reduces and stabilizes the cost of insurance and provides valuable risk management information.
    • Retrospectively rated insurance is a method of establishing a premium on large commercial accounts. The final premium is based on the insured's actual loss experience during the policy term, sometimes subject to a minimum and maximum premium, with the final premium determined by a formula. Under this plan, the current year's premium is based partially (or wholly) on the current year's losses, although the premium adjustments may take months or years beyond the current year's expiration date. The rating formula is guaranteed in the insurance contract. Formula: retrospective premium = converted loss + basic premium × tax multiplier. Numerous variations of this formula have been developed and are in use.
    • Formal self-insurance is the deliberate decision to pay for otherwise insurable losses out of one's own money.^{[citation needed]} This can be done on a formal basis by establishing a separate fund into which funds are deposited on a periodic basis, or by simply forgoing the purchase of available insurance and paying out-of-pocket. Self-insurance is usually used to pay for high-frequency, low-severity losses. Such losses, if covered by conventional insurance, mean having to pay a premium that includes loadings for the company's general expenses, cost of putting the policy on the books, acquisition expenses, premium taxes, and contingencies. While this is true for all insurance, for small, frequent losses the transaction costs may exceed the benefit of volatility reduction that insurance otherwise affords.^{[citation needed]}
    • Reinsurance is a type of insurance purchased by insurance companies or self-insured employers to protect against unexpected losses. Financial reinsurance is a form of reinsurance that is primarily used for capital management rather than to transfer insurance risk.
    • Social insurance can be many things to many people in many countries. But a summary of its essence is that it is a collection of insurance coverages (including components of life insurance, disability income insurance, unemployment insurance, health insurance, and others), plus retirement savings, that requires participation by all citizens. By forcing everyone in society to be a policyholder and pay premiums, it ensures that everyone can become a claimant when or if he/she needs to. Along the way this inevitably becomes related to other concepts such as the justice system and the welfare state. This is a large, complicated topic that engenders tremendous debate, which can be further studied in the following articles (and others):
      • National Insurance
      • Social safety net
      • Social security
      • Social Security debate (United States)
      • Social Security (United States)
      • Social welfare provision
    • Stop-loss insurance provides protection against catastrophic or unpredictable losses. It is purchased by organizations who do not want to assume 100% of the liability for losses arising from the plans. Under a stop-loss policy, the insurance company becomes liable for losses that exceed certain limits called deductibles.

11. Closed Community sSelf-Insurance

    
    
    Some communities prefer to create virtual insurance amongst themselves by other means than contractual risk transfer, which assigns explicit numerical values to risk. A number of religious groups, including the Amish and some Muslim groups, depend on support provided by their communities when disasters strike. The risk presented by any given person is assumed collectively by the community who all bear the cost of rebuilding lost property and supporting people whose needs are suddenly greater after a loss of some kind. In supportive communities where others can be trusted to follow community leaders, this tacit form of insurance can work. In this manner the community can even out the extreme differences in insurability that exist among its members. Some further justification is also provided by invoking the moral hazard of explicit insurance contracts.
    In the United Kingdom, The Crown (which, for practical purposes, meant the civil service) did not insure property such as government buildings. If a government building was damaged, the cost of repair would be met from public funds because, in the long run, this was cheaper than paying insurance premiums. Since many UK government buildings have been sold to property companies, and rented back, this arrangement is now less common and may have disappeared altogether.

Wow, very long article..for this topic (Types of Insurance)! Ok. finish until here, Thanks for read! Reference : en.wikipedia.org/wiki/Insurance#Types_of_insurance

How do Insurance Work ?

After we know what the meaning of insurance in the previous article, Now,  insuranceupdated.blogspot.com will discuss How do insurance work ?, Do you know how the insurance work? Well let us discuss, Insurance works by pooling risk.What is the meaning? It simply means that a large group of people who want to insure against a particular loss pay their premiums into what we will decision the insurance bucket, or pool. as a result of the number of insured individuals is so large, insurance companies can use statistical analysis to project what their actual losses will be within the given class.

They understand that not all insured individuals will suffer losses at the same time or at all. This allows the insurance companies to operate profitably and at the same time pay for claims that may arise. as an example, the majority have auto insurance but only a few truly get into an accident. You pay for the probability of the loss and for the protection that you will be paid for losses in the event they occur.

Risks

Life is full of risks, some are preventable or will a minimum of be decreased , some are avoidable and some are completely unforeseeable. What's necessary to know about risk when thinking about insurance is the type of risk, the effect of that risk, the cost of the risk and what you can do to mitigate the risk. Let's take the example of driving a car.

Type of risk: Total loss of vehicle, having to repair your vehicle,Bodily injury

The effect:  Having to rent a car and having to make car payments for a car that no longer exists, Spending time in the hospital.

The costs: Can range from small to terribly massive

Mitigating risk: Not driving in the least (risk avoidance), turning into a secure driver (you still have to contend with different drivers), or transferring the risk to someone else (insurance)

Let's explore this concept of risk management (or mitigation) principles a bit deeper and look at how you may apply them. The essential risk management tools indicate that risks that could bring financial losses and whose severity cannot be reduced ought to be transferred. You must also consider the relationship between the cost of risk transfer and the value of transferring that risk.

Risk Financing
If you choose to retain your risk exposures, then you be able to either transfer that risk (ie. to an insurance company), or you retain that risk either voluntarily (ie. you identify and accept the risk) or involuntarily (you identify the risk, but no insurance is available).

Risk Control
There are 2 ways that risks can be controlled. You be able to avoid the risk altogether, otherwise you can choose to minimize your risk.

Risk Sharing
Finally, you may also decide to share risk. For example, a business owner may decide that while he is willing to assume the risk of a new venture, he may want to share the risk with other owners by incorporating his business.

Back to our driving example. If you may get eliminate of the risk altogether, there would be no need for insurance. The only way this might happen in this case would be to avoid driving altogether. Also, if the cost of the loss or the effect of the loss is reasonable to you, then you may not need insurance.

Risks that involve a high severity of loss and a low frequency of loss, then risk transference (ie. insurance) is probably the most appropriate protection technique. Insurance is appropriate if the loss will cause you or your loved ones a significant financial loss or inconvenience. Do keep in mind that in some instances, you are required to purchase insurance (i.e. if operating a motor vehicle). For risks that are of low loss severity but high loss frequency, the most suitable method is either retention or reduction because the cost to transfer (or insure) the risk might be expensive. In different words, some damages are so inexpensive that it's worth taking the risk of having to pay for them yourself, instead of forking extra money over to the insurance company every month.

The Risk Management Method

After you've got determined that you would love to insure against a loss, the next step is to hunt insurance coverage. Here you've got several choices obtainable to you, however it's usally best to buy around.  you'll go on to the insurance underwriter through an agent, who can bind the policy.
The method of binding a policy is just a written acknowledgement distinguishing the most parts of your insurance contract. It's mean to provide temporary insurance protection to the consumer pending a formal policy being issued by the insurance company. It should be noted that agents work exclusively for the insurance company. There are 2 types of agents:

• Captive Agents: Captive agents represent a single insurance firm and are needed to solely do business with that one company.
• Freelance Agent: Freelance agents represent multiple companies and work on behalf of the client (not the insurance company) to search out the foremost acceptable policy.

   

Underwriting

Underwriting is the method of evaluating the risk to be insured. This is done by the insurer when deciding how probably it is that the loss will occur, how much the loss could be and then using this information to determine how much you should pay to insure against the risk.
The underwriting process will enable the insurer to determine what applicants meet their approval standards. For example, an insurance company might only accept applicants that they estimate will have actual loss experiences that are comparable to the expected loss experience factored into the company's premium fees. Depending on the type of insurance product you are buying, the underwriting process may examine your health records, driving history, insurable interest etc.

The concept of "insurable interest" stems from the idea that insurance is meant to protect and compensate for losses for an personal or individuals who may be adversely affected by a specific loss.
Insurance isn't meant to be a profit center for the policy's beneficiary. People are considered to have an insurable interest on their lives, the life of their spouses (possibly domestic partners) and dependents.

Insurance Contract

The insurance contract is a legal document that spells out the coverage, features, conditions and limitations of an insurance policy. It is critical that you read the contract and ask questions if you don't understand the coverage. You don't want to pay for the insurance and then find out that what you thought was covered isn't included.

Insurance terminology you should know:

Bound: Once the insurance has been accepted and is in place, it is known as "bound". The process of being bound is called the binding process.

Insurer: An individual or company that accepts the risk of loss and compensates the insured in the event of loss in exchange for a premium or payment. This is usually an insurance company.

Insured: The person or company transferring the risk of loss to a 3rd party through a contractual agreement (insurance policy). This is the person or entity who will be compensated for loss by an insurer under the terms of the insurance contract.

Insurance Rider/Endorsement: An attachment to an insurance policy that alters the policy's coverage or terms.

Insurance Umbrella Policy: When insurance coverage is insufficient, an umbrella policy may be purchased to cover losses above the limit of an underlying policy or policies, such as homeowners and auto insurance. While it applies to losses over the dollar amount in the underlying policies, terms of coverage are sometimes broader than those of underlying policies.

Insurable Interest: In order to insure something or somebody, the insured should provide proof that the loss will have a genuine economic impact in the event the loss occurs. Without an insurable interest, insurers will not cover the loss. It is worth noting that for property insurance policies, an insurable interest must exist during the underwriting process and at the time of loss. However, unlike with property insurance, with life insurance, an insurable interest must exist at the time of purchase only.

That's one of the basic knowledge you should know about insurance(how insurance works), let's us discuss specific types of policies in the next article.

Introduction About What is Insurance

This is the first article in insuranceupdated.blogspot.com, before we discuss around insurance, of course, we should know what is the meaning of insurance.

In terms of definition, Insurance is coverage. Here there is an agreement made ? between the two parties, the insurer and the insured in a bond. Bond here is for the insured to pay the premium. The premium here is to pay money damages when the insured suffered a loss in one day, whether the loss is certain or uncertain

For the insurer it must provide a payment of money taken by insurance, such as life insurance (health or death) or insurance (fire, cars, homes, valuables, etc.).

While the definition of insurance in the broadest sense is an agreement between the insured and the insurer, to receive a premium to provide reimbursement to the insured for any loss, damage, or loss of expected profit or loss may be due to a certain event.

Thus, it can be concluded that the insurer is:
1. a treaty
2. There is a requirement in an agreement, which pays a premium
3. Reimbursement will be given to the insured by the insurer
4. It is possible that the events are not sure or do not necessarily happen

While the cost of insurance premiums is the prerequisite in the insurance agreement. Because without the premium will be no insurance.

Insurance permits people (individually), businesses and alternative entities to safeguard themselves against vital potential losses and money hardship at a fairly reasonable rate. we are saying "significant" as a result of if the potential loss is little, then it does not be to pay a premium to safeguard against the loss. After all, you'd not pay a monthly premium to safeguard against a $50 loss as a result of this might not be thought of a money hardship for many.

Insurance is suitable after you wish to safeguard against a major financial loss. Take life assurance as Associate in Nursing example. If you're the first wage earner in your home, the loss of financial gain that you justr family would expertise as a results of our premature death is taken into account a major loss and hardship that you ought to shield them against. it'd be terribly tough for your family to interchange your financial gain, therefore the monthly premiums make sure that if you die, your financial gain are replaced by the insured quantity. a similar principle applies to several alternative varieties of insurance. If the potential loss can have a prejudicial result on the person or entity, insurance is sensible.

Everyone that wishes to safeguard themselves or somebody else against money hardship ought to take into  insurance account. this might include:

• Protective family when one's death from loss of financial gain
• Covering contingent liabilities
• Protective against the death of a key worker or person in your business
• Shopping for out a partner or co-shareholder when his or her death
• Protective your business from business interruption and loss of financial gain
• Protective yourself against unpredictable health expenses
• Protective your home against thievery, fire, flood and alternative hazards
• Protective yourself against lawsuits
• Protective yourself within the event of incapacity
• Protective your automobile against thievery or losses incurred thanks to accidents
• Etc.

OK. We think introduction about insurance was enough. Thanks for read this article