Aiisha Kuziyeva | 09.02.2024
What is insurance?
Insurance is one of the most effective ways of shielding yourself from financial losses and managing your risk in unexpected situations – be it the cost of visiting a doctor, property damage, repairing your home after a flood, or some similar loss.
It is a legal agreement between two parties i.e. the insurance company and the individual.
This insurance policy clearly outlines the terms and conditions under which the insurance company must provide coverage to the policyholder.
When a person buys an insurance policy from the insurance company, they will have to make regular payments (premium) for a specified period towards the insurance policy. Some premiums are paid monthly, like health insurance, whereas others may be paid once or twice a year. The cost of your premium generally depends on how much of a risk you are to the insurance company.
Most insurance policies include a deductible, in addition to the premiums. That’s the amount a person has to pay first, before the insurance company pays their share. For instance, if your homeowner's policy has a $300 deductible and a flood causes $2,000 in damage, you would first pay $300, and then your insurance company would cover the remaining $1700. Some policies allow you to select your deductible. Generally, opting for a higher deductible leads to a lower insurance premium.
There are common types of insurance:
Advantages of insurance:
Disadvantages of insurance:
It is a legal agreement between two parties i.e. the insurance company and the individual.
This insurance policy clearly outlines the terms and conditions under which the insurance company must provide coverage to the policyholder.
When a person buys an insurance policy from the insurance company, they will have to make regular payments (premium) for a specified period towards the insurance policy. Some premiums are paid monthly, like health insurance, whereas others may be paid once or twice a year. The cost of your premium generally depends on how much of a risk you are to the insurance company.
Most insurance policies include a deductible, in addition to the premiums. That’s the amount a person has to pay first, before the insurance company pays their share. For instance, if your homeowner's policy has a $300 deductible and a flood causes $2,000 in damage, you would first pay $300, and then your insurance company would cover the remaining $1700. Some policies allow you to select your deductible. Generally, opting for a higher deductible leads to a lower insurance premium.
There are common types of insurance:
- Health insurance - covers treatment for injuries, illnesses, and health conditions, often including preventative care like annual checkups.
- Travel insurance - designed to safeguard travellers against unforeseen events and financial losses associated with a trip.
- Disability insurance - provides coverage when illness or injury prevents you from earning a living
- Flood insurance - helps cover physical damage to your home and belongings from floods or related losses from rising water.
- Auto insurance - Protects you from paying the full cost for vehicle repairs and medical expenses in case of an accident.
Advantages of insurance:
- Financial Protection
- Risk Management
- Investment Opportunities
- Access to Healthcare
- Confidence
- Tax Benefits
- Assists in financial planning and guarantees income
Disadvantages of insurance:
- Insurance Has Many Terms and Conditions
- Long and Costly Legal Procedures
- Additional Fees
- Returns may not be significant
