Insurance is a way to protect yourself or your belongings from a financial loss, damage, or injuries that may occur due to unexpected catastrophes. It is basically buying a risk from a person in return for some initial money, called Premium, and spread the risk around a community. This makes the person insured and less burdened, free from tension, or fear of loss so that he can go about making more wealth.
What is Insurance?
Let us consider an example. Tom is a man possessing a super expensive car, and he is always afraid that the vehicle may get damaged from an accident or stolen. He is worried so that he approaches a friend Harry to seek help. He proposes that he pay an amount of 10,000 rupees to Harry as Premium, and when his car is actually met with a catastrophe, Harry has to buy Tom another car of the same model. Now, harry may go on to carry out the same proposal to another set of people, pooling the Premium, so that when one of then actually loses their car, he can buy them a new one from the pooled funds.
In the above example, tom has to sign a contract that contains the terms and conditions of the insurance policy. He s called an insured or Policyholder. Harry, who transfers the risk is called the insurer or underwriter and may belong to an insurance company or insurance carrier.
Insurance has its roots in waterways trading. Early Chinese and Babylonian sea merchants used to insure their ships and goods against shipping risks like mid-way pirate attack or damage due to bad weather.
Modern insurances rose when the great city of London caught fire in 1666. It had ravaged about 13,000 homes. That was when the architect Sir Christopher Wren included an ‘Insurance Office’ in his plan of rebuilding.
The Lloyds of London actually emerged from a coffee shop in London where many merchants, sea traders, and business people hung out. While discussing their businesses, the idea of modern-day insurance came into play.
Types of Insurances
- Auto Insurance
It is a type of insurance where a vehicle is insured against a loss. Its coverage includes traffic collision, bodily injury or property damage, cost of treatment of the driver and passengers due to injuries.
- Health insurance.
This type of insurance also contains dental insurance. It deals with policies that cover the cost of medical treatments. In many countries, it is a part of the employer’s benefits.
- Income Protection Insurance
This insurance is the kind of coverage given to people who suddenly become disabled and cannot work anymore due to any reason. In order to sustain their income, Disability insurance policies provide monthly support to help pay for the necessary needs as usual.
It is of two types: short-term, in case he recovers sooner, and long term.
- Casualty Insurance
This insurance is against accidents (natural or human-made) and not pertaining to any specific object or person. It has a broad spectrum.
- Life insurance
It provides a monetary benefit to the deceased person’s family in either lump sum or annually.
- Property Insurance
This kind of insurance provides insurance against property against risks like fire, weather, theft, or natural calamity.
Why is Insurance Necessary?
If you own any property like a home or ground or a vehicle, you are obviously prone to be worried about their safety. Or are you a businessman holding a large corporate?
Insurance provides you safety for repairs and replacement of any damage that is covered in your policy for your home. Vehicles are safe against theft, damage from perils like fire and water. To maintain your current standards even after an unexpected catastrophe, health care cost, provide for your family after your death, insured vacations, etc.
Take an insurance policy today and lead a safe and secure life!
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