Life today, is full of risks and adventures on every step. As man has started interfering with nature, natural disasters have started frequenting. The speedy and stressful life in this competitive world has become a cause of the decline in the overall health of individuals. Loss of life and property has become common. With the changing times, the need of risk management has increased, thus increasing the requirement for the insurance of life and property and other needful resources.
Insurance is an effective way of risk management and is defined as an equitable transfer of the risk of a loss in exchange of a premium. Every quantifiable risk can be insured.
Basic Types of Insurance
Health insurance policies cover the costs of medical treatments for various types of diseases that threaten human life. Disability insurance is considered as a different type of insurance that aims at providing financial support to the physically disabled individuals in society. Casualty insurance policies cover accidents.
Life is priceless. However, there are measures to 'insure' it. Life insurance policies provide a monetary benefit to the descendants of the deceased individual. They also aim at providing the insured person's family with burial and funeral expenses.
Property insurance insures property, thus protecting it against threats like fire, theft, or damage due to harsh weather conditions.
Credit insurance policies are meant for the repayment of loans in case of death, disability, or unemployment of the borrower.
Accidental Death and Dismemberment Insurance
This insurance covers death and injury that results from accidents. Death that results from illness, suicide, or natural reasons is not covered under this type of insurance.
Also called, vehicle insurance, it covers the risk borne in traffic accidents and liabilities that can result from accidents.
- Guaranteed Asset Protection insurance (GAP) comes supplemented with automobile insurance policies. The losses that vehicle insurance policies do not cover are handled by the accompanying GAP insurances.
- Public auto insurance is an automobile insurance scheme owned by the government. It mainly operates in British Colombia, Manitoba, and Quebec.
It indemnifies the insured against the expenses that may have to be borne for the repair or replacement of home boilers as well as the plumbing, heating, and electric systems of the household.
In this insurance service, the bond issuers can pay the premiums to a third party in case of failure on part of the issuer. In such cases, the third party provides the interest and capital repayments prescribed by the bond.
Business Overhead Expense Disability Insurance
The person who is insured by this type of insurance manages the risk of his/her disability by arranging the insurance authority to bear the business overhead expenses in case of the business entrepreneur's disability. Business insurance is an excellent way to insure a business.
It covers the loss that results from an accident. It may bear the expenses of the vehicle loss or the costs incurred in restoring the damages resulting from accident. Casualty insurance policies do not cover life, health, and property losses.
These bonds are meant to transfer the responsibility of a certain set of risks from the sponsors to the investors.
This insurance is meant for the business merchants who accept credit cards. When accepting credit cards for purchases involving large money transactions, merchants risk their business. Fraudulent behavior on part of the credit cardholder or the use of unauthorized or invalid credit cards puts the merchant's money at stake. Chargeback insurance policies protect the merchants from these risks.
It covers the loss or damage to the personal possessions of an individual while they are located in one's home. The insurance might also cover the possessions kept in the exterior of one's household, such as things kept in one's garden area. These insurance policies find utility for people renting houses. It is generally purchased in collaboration with a home insurance policy.
Corporate-owned Life Insurance
The employing companies hold this insurance for covering the sudden losses of their employees. Originally, these insurances were held by companies to cover the risk of the death of their key employees. This insurance insures the cost incurred on the recruitment and training arrangements that have to be made in case of an unexpected death of any of the company employees.
Credit insurance policies are designed to compensate for credit risks in business.
Employee thefts and offenses causing financial losses to a business are covered under crime insurance policies. Crime insurance can be used to cover the damage caused by crimes such as murders and rapes.
Critical Illness Insurance
Critical illness insurance policies prescribe a list of diseases to be grouped under the class of critical ones. The policyholders are insured in case of being afflicted by any of the diseases enlisted as critical in the policy. The policy may be structured to provide the insured individual with regular payments or a lump sum amount on being diagnosed with one of the critical illnesses.
Agricultural producers purchase this insurance to protect themselves against a loss or damage to their crops on account of natural disasters or revenue losses.
It is categorized under the class of health insurances and is meant to pay the costs incurred on dental care. Considering the increasingly expensive dental treatments, dental insurance policies form an important section of health insurances today.
These insurances protect the deposits in event of bank runs. A bank run is said to occur when a large number of customers of a bank withdraw their deposits from a bank. Deposit insurance aims at covering the risk of running into this kind of financial crisis.
Disability insurance covers the insured individual's earnings against the risk that a disability can make working impossible for him/her. Disability insurance policies are arrangements to secure one's future in case the individual is unable to work and earn.
It is a type of property insurance, which covers the risks borne by houses on account of frequently occurring earthquakes. It insures the damage caused to property as a result of earthquakes. It is widely used in Japan and California.
This insurance covers the losses that one may have to suffer from, while residing and working in a non-native country. An expatriate insurance policy has to be purchased before one relocates to another country. It covers the period of stay in the non-native country.
These bonds serve as a protection for a business from the fraudulent behavior of its employees.
It covers the damages to property that result from floods. Around 20% of the households in the United States are insured for flood, as they are susceptible to them.
General insurance schemes include policies for automobiles, homeowners and precisely any insurance that does not fall under life insurance. General insurance policies cover losses resulting from certain financial events.
It covers the risks borne by a group of people. Group insurance policies are generally purchased for a group of members of a society or a group of professionals in an organization. It is less expensive than individual insurance policies.
The expenses incurred on treating physical disabilities, long-term nursing and custodial care are covered under health insurance schemes. Health insurance policies insure the payments for medical care.
It insures the losses incurred on restoring the damages resulting from hazards to households. Home insurance policies cover losses of the personal possessions of homeowners.
It includes the compensations for work-related injuries. It can be used along with health insurance, workers' compensation, or personal injury services.
Keyman insurance policy is the one purchased by a businessman to secure the potential losses of his resources and cover the incapacity or death of a key employee. Keyman insurance protects you from the greatest of business risks.
It is designed to cover the property owners from threats like fire, earthquake, and floods as also thefts that are potential dangers to their property.
Lenders Mortgage Insurance
It compensates for the losses incurred by the lender when the mortgager is unable to repay the loan or when the lender in unable to compensate for the lent amount even after the sale of the mortgaged property.
It can be called a part of the general insurance system that deals with risk financing. It typically involves the payment to the third party suffering from a loss and not to the insured party.
Under life insurance schemes, the policyholder and the policy owner contract according to which the insurer is liable to pay a certain amount of money in case of death or terminal illness of the insured individual.
- Whole life insurance is a life insurance policy that remains in force throughout the life of the insured individual and requires him/her to pay premiums every year.
- Pension term insurance is a type of life insurance that is popular is the United Kingdom. After 2006, when the policyholders were offered tax benefits on the premiums they paid, pension term insurance policies gained wide popularity.
- Permanent life insurance refers to a life insurance policy, which is for the life of the insured individual.
- Term life insurance policy is purchased for a specific period and the policy amount is paid to the beneficiary in event of the death of the insured during the specific period.
- Return of premium life insurance is a kind of term life insurance policy wherein the premiums are returned after a stipulated period of time in case the policyholder does not use the coverage during that period.
- Stranger originated life insurance is initiated by a person who bears no relation with the person for whom the policy is being taken out. The stranger offers to pay the premiums against the insured person's life.
- Universal life insurance is a permanent life insurance that is based on cash value. It can be used for tax benefits. Variable Universal life insurance is a similar insurance scheme that builds cash value. It allows the policyholder to invest in different accounts.
Loan Protection Insurance
It secures an individual in terms of his/her loan payments in case the individual has to go through a period of unemployment during the time of the payment of his dues.
Locked Funds Insurance
Banks and governments issue locked fund insurance policies in collaboration with each other. These policies protect public funds from being manipulated by unauthorized parties.
Long-term Care Insurance
It aims at providing the insured individuals for a long-term care and covers the expenses, which are not covered by health insurance policies or Medicare.
It covers the losses incurred in damage to ships, terminals and any property that is transported through cargo. Inland marine insurance, which is closely associated with marine insurance, secures the moving or movable property of an individual.
It comprises private supplemental health insurance plans, which are purchased by people of the United States. It covers the expenses beyond those borne by Medicare.
Mortgage Life Insurance
This covers repayment mortgage, referring to a mortgage in which monthly repayments imply the repayment of the capital along with the accumulated interest.
The mutual insurance policyholders have a certain amount of ownership rights in the organization. Those protected by the insurance possess the rights to elect the organization management and take part in the distribution of net assets in case the organization stops doing business.
In this form of an insurance contract, the insurance covers the losses by the insurance company irrespective of the party responsible for the losses.
Parametric insurance policies define a contract between the policyholder and the issuer according to which the issuer agrees to pay a certain amount of money to the insured in the event of a natural disaster.
Payment Protection Insurance
These policies insure the repayment of debts in case the insured suffers from unemployment on account of an accident or illness and fails to repay his/her loan.
Pet insurance policies cover the costs incurred in treating a pet's illness. Some pet insurance policies also cover the losses borne by the pet owner in event of the death or theft of the pet.
Political Risk Insurance
Political risk insurance policies cover the political risks to businesses. Political violence like riots, terrorism and war, and governmental arrogation are classified as political risks to business.
Pre-paid Legal Services
It refers to a scheme wherein a person pays a monthly fee and is entitled to access a number of legal services on call. Individuals are charged for certain services like monthly legal advice and consultation. As the insurance commission looks after the pre-paid legal services, they are classified under the different types of insurance.
Professional Indemnity Insurance
It secures the policyholder against losses incurred as a result of a negligent act in the policyholder's business. Professional indemnity insurance also covers the loss that can result from claims for the policyholder's breach of duty and also indemnifies the policyholder against the policyholder's civil liability. It is also known as professional liability insurance.
It indemnifies the policyholder against the risks to his/her property. Insurances covering fire, flood, and earthquake threats as also home insurances are special forms of property insurance.
Protection and Indemnity Insurance
It is a marine insurance that protects the insured from third party liabilities arising from owning ships.
Reinsurance is not exactly a type of insurance but is rather a means by which insurance companies safeguard themselves from the risk of losses with other insurance companies. Reinsurers provide the insurance companies with insurance. Even insurances need to be insured.
Landlord rent guarantee insurance and legal assistance insurance together cover the costs incurred by the landlords in recovering their rent or in taking legal action against the tenants failing to pay their rents.
It is a way of risk management wherein a certain amount of money is set aside to safeguard one's future. Self-insurance involves setting aside an amount that can cover for the unexpected losses in future.
Self-funded health care refers to a self-insurance that is provided by an employer to his/her employees in assumption of a risk in paying their claims for benefits.
Self-funded health care refers to a self-insurance that is provided by an employer to his/her employees in assumption of a risk in paying their claims for benefits.
The potential losses that can be caused as a result of terrorist activities are covered under terrorism insurance. Terrorist attacks are almost unpredictable and extremely perilous. This has led people in some parts of the world to secure themselves against terrorism.
Title Insurance in the United States
It indemnifies a person against financial losses that may result from defects in title to real property. The losses incurred from invalid mortgages are also covered under title insurance policies. Title insurance is a type of insurance that protects the owner or lender. Commonly associated with closing costs on the settlement of a house or property, real estate title insurance consists of two distinct phases. During the first phase, the title company works to define the boundaries of the real estate being purchased and also conducts a search that determines the status of the property in terms of unpaid real estate taxes and other claims. In the second phase, during the term of the mortgage, the title company protects both the owner and the lender from financial loss resulting from problems with the title that may arise due to unexpected property claims that are not excluded by the policy.
Long journeys come with a risk. The insurance purchased to compensate for the losses during a travel is known as travel insurance. It covers medical expenses and financial losses and applies to journeys within one's country and abroad.
On lines similar to dental insurance, vision insurance covers the expenses one may have to bear in eye treatments and services given by ophthalmologists.
This is a proposed form of insurance, which is intended to provide workers with compensation in case they are compelled to move to jobs with lower salaries.
War Risk Insurance
War risk insurance policies cover the losses one may have to incur in the event of war. The war risks include invasion, rebellion, hijacking and may also include the threats from weapons that cause massive destruction of life and property.
It is intended to provide the company employees with monetary compensations in case they are injured at the workplace. Workers' compensation can be given in the form of reimbursement of medical bills, weekly wages, or benefits to the employee's dependents.
Insurance is after all an attempt to compensate for grave losses in and of life. But can anything be 'insured' in the real sense? Can compensations heal the grief of loss? Surely, compensations cannot substitute life.