Insurance is an arrangement for financial protection from potential financial loss. It’s a form of financial risk management, mostly utilized to offset the threat of an uncertain or contingent gain. A variety of insurance products are available to meet your insurance needs. Insurance policies can be purchased on the open market as a contract between an insurer and an insured or protected party. Or, insurance may be purchased within an existing group of insurance policies.
Some insurance policies are guaranteed by state laws requiring minimum premiums to be paid to ensure that policyholders remain financially protected. In certain states automobile insurance is required by law. Many consumers buy a car because of its perceived value or because of discounts provided for policyholders with good driving records. Insured parties can negotiate to create a more affordable payment plan that meets both their needs and budget. In order for insuring arrangements to work both parties must be financially protected.
Insurance works by paying a premium based on the risk of the insured party. Premiums are collected from policyholders and spread out to cover the expenses of each claim. Policyholders pay the initial premium which is applied to any claim and then the difference between the initial premium and the actual loss or damage is forwarded to the insurer. Premiums are normally based on the insurer’s estimates of future claims, loss factors and statistics. They are designed to make the policyholders’ premium payments more affordable.
Some insurance policies require higher premiums than others. Those with a higher premium are more likely to be declined or rated lower on the importance list of insurers. Some factors that affect insurance premiums include age, sex, marital status and driving record. High premiums for some groups may be justified in order to guarantee that these groups of people are more likely to file a claim than others, thus protecting the insurer in the event of significant losses.
Another type of insurances, health insurance, is designed to reimburse the financial loss resulting from sudden, unforeseen, catastrophic medical expenses. Health insurance policies are either private or public, offered by private health insurance companies. An HMO health insurance policy is a managed care plan. Under this type of coverage, health insurance company provides a primary health care provider and reimbursement are made directly to the insured for out-of-pocket medical expenses. A PPO health insurance policy is similar to an HMO policy.
Slip and fall insurance policies pay a fee for property damage that occurs to a claimant’s personal property within a certain time period after a claim has been paid. The fee assessed is generally a percentage of the total cost of the damage. Policies also may include provisions that allow the insurer to reclaim unpaid premiums, if a claim is submitted before the due date. Insured parties can often adjust the deductibles that are associated with these types of insurance policies.