Insurance is a risk management tool that helps to minimize risks. Certain key terms used in insurance include the insurer and the insured. The insurer is the entity that offers insurance while the insured is the individual that buys insurance. When the insured gets cover against particular perils, they transfer the cost of any losses resulting from the risks to the insured. The consideration paid by the insured for the cover is called the premium. Once the insurance company receives the premium, they invest the funds so that they can grow and enable them to pay out the claims to the insured persons. There are different types and levels of insurance that are beneficial to an individual. One of them is life insurance which is vital to people with dependents. A life insurance policy offers a guarantee of compensation in case of death or disability of the insured. It is designed to cover the living expenses of your dependents in your absence. There are two levels of life insurance policies: term life and whole life policies. Term life insurance offers coverage for a certain period while whole life policies provide coverage for the entire lifetime of the insured for their entire lifetime.
Health insurance is a type of insurance policy that covers the medical treatments of an individual. Under this policy, human life is the subject matter hence it is very beneficial for the general welfare of an individual. Another type of insurance is automobile insurance which is commonly held. This policy covers automobiles such as cars in case of damages you may cause in the event of hitting someone or damages to the car itself. There are also homeowners’ policies that provide coverage to homeowners in case of losses caused by perils such as fire, theft or floods. Therefore, insurance is crucial to maintain a high standard of living devoid of many uncertainties.