What Is Insurance?
Insurance refers to a contract represented by a policy where an individual or entity is set to get reimbursement or protection against losses in exchange for constant payouts known as premiums. There are generally two types of insurance businesses, namely personal insurance and general insurance.
Personal Insurance refers to cover against personal harm that may occur as a result of accidents, maladies, and death. This, therefore, means that personal insurance is effectively subdivided into different categories, such as life insurance, health insurance, and personal accident insurance.
a. Life Insurance
In this type of insurance, the subject matter is primarily human life. It, therefore, means that the insured pay premiums in exchange for a lump sum in the event of death or after the expiry of a certain time period. Additionally, this type of insurance provides financial assistance during old age or for bereaved families in the event of the death of their breadwinner. Life insurance also provides financial compensation in the event of an accident.
b. Health Insurance
Health insurance provides coverage for hospital bills or all medication costs accrued due to treatment for health complications.
c. Personal Accident Insurance
This type of insurance typically protects against bodily harm caused by accidents.
General insurance includes a wide scope of insurance businesses, such as liability insurance, property insurance, marine insurance, fire insurance, and social insurance.
a. Property Insurance
Under this type of insurance, a person’s or society’s property is protected against certain specified risks. Property insurance encompasses a wide range of risks, such as cover against marine and fire perils, damage to property, theft, the death of animals, and destruction of crops.
b. Marine Insurance
Marine insurance provides protection and covers against marine perils at sea. Marine perils, in this case, may refer to collision with a rock, capture by pirates, fire, and capture by enemies in a war situation. Typically, all perils that are likely to cause disappearance, damage or destruction of the ship or cargo, as well as failure to pay for freight, are normally covered under marine insurance.
c. Fire Insurance
Fire insurance covers against fire damage which may otherwise adversely affect an individual’s or society’s economic status if not covered. This is because fire insurance ensures that the business, industry, or property remain in approximately the same position as before. Fire insurance not only provides cover against fire risks in a normal situation but also provides cover for consequential risks in the event of a riot, war, and turmoil.
4. Liability Insurance
In this category of insurance, the insurer provides cover for the insured in the event that they are required to pay for damage to property or loss of a person from injury or death. The principle of liability insurance is applied to various minor forms of insurance, such as motor car insurance, machine insurance, or fidelity insurance.
5. Social Insurance
Social insurance refers to a type of insurance whereby the fiscally strong in the society pay out premiums in order to cover for the less fortunate or fiscally weak in the society. The various types of social insurance include pension schemes, industrial insurance, sickness insurance, unemployment benefits, and disability benefits.
6. Guarantee Insurance
This type of insurance is purchased by parties on a contract and normally offers coverage in case either of them engages in a failure that is sure to cause loss to the other party. Typically, all losses arising from disappearance, dishonesty, and disloyalty of the second party are covered.
Other Types of Insurance
There are various other minor types of insurance in the general insurance category that also deserve mention. They include state employee insurance, export-credit insurance, and miscellaneous insurance.
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