Insurance Basics

What is Insurance?

Insurance is a financial protection plan that provides coverage against unexpected losses or damages in exchange for a premium.

Types of Insurance:

• Life Insurance: Provides a financial safety net for family members in the event of death.
• Health Insurance: Covers medical expenses and provides access to medical care.
• Property Insurance: Protects against damage or loss of property, such as homes, cars, or businesses.
• Liability Insurance: Covers damages or injuries to others for which the policyholder is responsible.
• Disability Insurance: Provides income replacement for individuals who become unable to work due to illness or injury.

Key Concepts:

• Premium: The amount paid by the policyholder to maintain coverage.
• Deductible: The amount the policyholder must pay out-of-pocket before insurance coverage begins.
• Policy Limit: The maximum amount the insurance company will pay for a claim.
• Claim: A request for payment by the policyholder for a covered event.
• Risk Management: Identifying and mitigating potential risks to minimize losses.

Insurance Principles:

• Utmost Good Faith: Policyholders must disclose all relevant information to the insurer.
• Indemnity: The insurer restores the policyholder to their pre-loss state.
• Subrogation: The insurer may pursue a third party for damages on behalf of the policyholder.

Insurance Policy Components:

• Declarations: Policy details, including the policyholder's information and coverage details.
• Policy Conditions: Terms and conditions of the policy, including exclusions and limitations.
• Riders: Optional add-ons to customize the policy.
• Exclusions: Specific events or circumstances not covered by the policy.