What is Insurance?
What is insurance now?
- For a lot of you who don’t understand what Insurance is, you need to understand that there’s something called risk and reward.
- So we’ve always been told the more risk you take the more reward, you can get but some risk is good risk and some risk is bad risk.
- The bad risk is the risk that we cannot predict the risk that we are, not sure can happen.
- When or we know if it happens, it will devastate or destroy everything. That is what we call risk. Should be transferred.
Insurance means transferring risk :
- So there are three things that you can do with risk.
- You can either keep the risk which can be good, or risk is what you should keep their is a bad risk, which you should ensure.
- Now Insurance means transferring risk to a third party. That would take care of it. And if it did happen, they would compensate you for that losses.
- So when there’s a risk, there is a turn, but they can also be losses.
- If there is a loss, who takes care of it for you, that’s the concept of insurance.
So, for example :
- would be medical bills, if you fall sick, you know, that you will spend money to get.
- Well, if you want, you can transfer that risk to an insurance company.
- The company’s responsibility is, they would charge you a small premium collect all that premium into a pool
- which is called the risk pool, and whenever there is a claim, they would use that money in the pool to pay you for the requirements.
So let’s say, for example :
- I buy medical insurance and I fall sick.
- Now my premium might be lets say athousand dollars.
- What happens is when I have amedical bill, my medical bill could be greater than a thousand dollars.
- Could be lesser than a thousand dollars but we don’t know.
- So, whatever that bill is the insurance company would be able to pay that for you.
- If it’s over a thousand dollars you’re protected.
- If it’s less than a thousand dollars, you lost that premium for that year.
- However, you know that you didn’t have to carry that.
- So you have now transferred that risk away to an insurance company, that’s thepurpose of insurance.
- Now, alot of people are confused on the different types of insurance that exist in the market. Because just, there are so many.
Insurance categories :
Insurance can be categorized into three categories
- life insurance
- medical insurance
- non-life insurance.
life insurance :
the different types of products under life insurance would be
- whole life insurance
- term insurance
- universal life
- unit Linked
- variable universal life
These are five primary types of life insurance
medical insurance :
There are basically a few more type. So you’ve got health insurance, which basically covers all your doctor’s bills. You have critical illness Insurance, long-term care, disability. These all fall under the medical category
non-life insurance :
Non-life insurance are all your
- car Insurances
- property Insurance
- business risk
- Liability insurance
has these are all the different non-life insurance has. So, once you have understood that, there arethree primary categories, understanding where your risk will fit is most important to you. So take the time to research which kind of insurance is best for you.
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