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What Is Insurance?
Great question! We all think we know what it is, right? For many of us, it is what we are forced to buy in order to drive. For others, it’s that thing that Obama decided to play with. For others, it’s a way to save money. To some of us, it’s a form of gambling. Since the industry is so vast and complex, maybe we forget (or don’t realize) what insurance really is.
In short, insurance is a mechanism where a person or business purchases a policy whereby they are guaranteed to be compensated for any covered loss, in exchange for paying a premium. Pretty simple, right?
It can also be viewed as a contract. I (the policy holder) pay money (the premium) to a company (the insurance company) in exchange for a promise (the contract/policy) that the company will compensate me if a certain event occurs. The company will cover me against any damages that are covered in the policy, as long as I continue to make my agreed upon payments (premiums) to them.
Maybe this is getting a bit complicated? Let’s break it down with an example. Tim wants life insurance. Tim finds a friendly agent that works for the Duck Insurance Company (DIC). Tim purchases a policy for $10 a month. That term policy will last for 10 years, and guarantees a payment of $100,000 if Tim dies within 10 years. Tim names his wife (Buggy) as the beneficiary.
Under this example, Tim is the insured. He has entered into a contractual relationship with DIC. As long as he continues to make his $10 a month payments (premiums), DIC promises to pay Buggy $100,000 if Tim dies (the covered event) within 10 years.
So, back to the original question: what is insurance? It is a way that we can protect ourselves from certain losses by paying a small amount at a time, in order to receive compensation in the future if a certain loss/damage happens. In other words, insurance is a way to be prepared for a major loss in the future, that is broken down into small payments over that period of time.
What Kinds Of Insurance Can I Get?
Another good question! You can get insurance for almost anything! Individuals, companies and even governments purchase insurance. Virtually everyone in first world countries will own several different types of insurance. In some cases, it’s mandated. In other cases, we just like to have it. For most of us, insurance offers “peace of mind”. When I am insured against a certain loss, I tend to not worry about it as much.
This peace of mind provided by insurance has led to thousands of different kinds of policies and coverage. It touches virtually every part of our lives in one way or another.
A small sample of the different kinds of insurance includes:
- Automobiles: to protect against damages resulting from accidents in our vehicles.
- Home: we insure against damages to our homes.
- Health: to help us when we need medical attention.
- Life: to help our family when we die.
- Business: to protect our businesses against damages and liabilities.
The list goes on and on. If you can imagine a circumstance which may lead to some form of damages or monetary losses, there is likely an insurance policy that will cover it.
How Can I Find A Good Price On Insurance?
Fantastic question! We have dozens of articles that are designed to make you a savvy insurance consumer. Feel free to use that search feature to explore them.
The short answer to this question is to shop, shop, and shop some more! The only way to get a great deal (cheap insurance) is to request quotes from several companies. You will almost never find the best deal with the first company/agent that you speak with. All shoppers know that the secret to finding a good deal is to shop around until you find it.
Of course it also helps if you know what you are shopping for. This is where this site kicks in! Our goal is to make you an informed consumer. Once you now what you really need, you can refine your search to find the best deal out there. If you become an informed insurance consumer that knows how to shop, you will be a force to be reckoned with!
Any Last Words Of Wisdom?
That is the best question ever! My best advice is to read as many articles on this site as you can. The more you learn, the more you will know. The more you know, the better prepared you will be. Hopefully, you will become an insurance consumer that is prepared to protect yourself from life’s uncertainties.
Again, thank you so much for visiting us at Insurance 411. We really do appreciate it.