Insurance - all the fundamental principles

What is insurance?

Insurance is a way to protect against financial loss in a wide variety of situations. This is a contract in which a party agrees to pay for financial loss of any other party arising from a specified event.
Insurance works on the principle of sharing losses. If you want to be insured against any type of loss, agree to make regular payments, known as premiums to an insurance company. In return, the company gives you a contract, the insurance. The Company undertakes to pay a certain sum of money for the type of loss statement in the policy.

History

Insurance is thousands of years. The code of Hammurabi, a collection of laws 1700BC, Babylonians seems to be the first form of credit insurance. A borrower does not have to repay a loan if personal misfortune, it was impossible to do so. Insurance as we know it today dates back to the great fire of London in 1666, which devoured replant houses. As a result of this disaster, Nicholas Barbon has opened an Office of buildings.

Types of insurance

Insurance generally covers situations of pure risk — that is, situations which losses can only occur. These situations include fires, floods and accidents. Also, people buy insurance to cover the unusual kinds of financial losses as a dancer would ensure his legs against injury. There are mainly three types of insurance policies sold:

1 Insurance

A life insurance policy provides that the insurance company will pay a certain amount when the person dies. This can be paid in a lump sum or in instalments the recipient [persons appointed by the policyholder to receive the death benefit]. Certain types of life insurance policies also allows subscribers to save money. Such policies have a cash value. A policyholder may borrow money against the value in cash or surrender the policy for its cash value.

Annuities

There is savings plans sold by insurance companies to provide a fixed, regular retirement income. If [the annuity owner] annuitant dies prior to receive the number of payments, the insurance company must continue the payment to the beneficiary.

Dividends

Some insurance refund part of the premiums in the form of dividends. These policies are called political participants. An insurance company pays dividends if the money that he collected premium exceeds the amount necessary to cover the administrative costs and the benefits. Dividends can also include a share of the profits earned on investment made with the bonus funds business. Dividends are usually paid on life insurance.

2 Medicare private

Medicare pays all or part of the cost of hospitalization, surgery, test lab, medicines and other medical care. Increase the cost of medical care has increased the need for adequate health insurance. You could suffer significant financial difficulties without this protection, particularly in the case of a serious illness or accident.

Dental insurance is one of the fastest growing health insurance types. It helps to pay for a wide variety of dental services.

3 Property & insurance

Individuals and businesses buy property and liability insurance to protect their assets against financial loss. Property insurance provides direct compensation if goods of a policyholder are damaged, destroyed or lost in peril. Liability insurance protects individuals and businesses against potential financial losses if their actions result in bodily injury suffered by others or damage to property belonging to third parties.

The main types of individual coverage are:

o owners insurance

This provides protection against damages losses in home owner and its contents.

o for automobile insurance

This is most commonly purchased and the largest insurance types. The drivers are legally responsible for all costs arising from accidents they cause. This insurance protects a policyholder against financial losses of accidents.

Financial sustainability of insurance companies

Financial stability and strength of the insurance company must be an important factor to consider when purchasing an insurance contract. Currently a paid insurance premium provides coverage of losses that can result from many years in the future. For this reason, the viability of carrier's insurance is very important. In recent years, a number of insurance companies is become insolvent, leaving their subscribers no coverage (or cover only a pool of insurance to the Government with less attractive payment for losses).

How the insurance is sold

Most insurance companies sell policy officials. Exclusive agents are employees of an insurance company who only sell this company policies. Self-employed agents sell fonts for several companies.

David Dugan is an author that contributes to information assurance site http://insurance.divinfo.com/, a site that contains information about the auto, homeowners, life, pet and many other types of insurance as well as the site of retirement http://retirement.divinfo.com