Reviewed by Aug 27, 2020| Updated on
Insurance is a contract in which an individual or entity receives financial reimbursement against losses from an insurance company. The company pools clients risks to make payments more affordable for the insured.
Insurance policies are used to hedge against the risk of financial losses, both big and small, that may result from damage to the insured or her property, or from liability for damage or injury caused to a third party.
What is Insurance ?
There is a multitude of different types of insurance policies available, and virtually any individual or business can find an insurance company willing to insure them for a price. The most common types of personal insurance policies are auto, health, homeowners, and life.
Why is Insurance important?
Businesses require special types of insurance policies that covers the risks faced by businesses of every type. For example, a restaurant needs a policy that covers damage or injury caused due to cooking. In the case of an auto dealer, coverage may be required against damage or injury caused during test drives.
Tips and tricks for gaining maximum benefits
How to choose the policy that best suits you:
- Premium: A policy premium is the price or the monthly cost applicable to avail the policy protection. The premium is determined based on the insurer or his business's risk profile. It may also be based on the creditworthiness of the insured entity. Different insurers may charge different premiums for a similar policy.
- Policy Limit Policy limit means the maximum amount offered by an insurer for a covered loss. The maximum limit will be set per period (annual or term), over the life of the policy, or per loss/injury. A higher policy limit means a higher premium to be paid.
- Deductible The deductible is a specific amount the policyholder must pay from the pocket before the insurer pays a claim. Deductibles are applicable on a per-policy or per-claim basis, depending on the insurer and the type of policy.