How do I know What Type of Insurance I Have? |Template.

How do I know What Type of Insurance I Have?

Life is full of risks and uncertainty—there’s no question about that. many individuals and companies have faced a whole lot of financial crises in their businesses and homes.

These unexpected losses have contributed to the reason why many individuals and co-operation have failed entirely.

The need for insurance become the only lasting solution that offers any form of protection or compensation to individual facing any kind of misfortune or disaster.

Insurance relieves one from unexpected losses. And while most people get acquainted with what insurance is all about, not everyone knows the basic need for insurance and how it can offer help to their problems.

Need for Insurance

The purpose of insurance is to compensate or indemnify the affected person for his financial loss.

Insurance neither removes the loss nor does it undertake to stop the misfortune or disaster from happening.

All it does is minimize its pressure or negative effect from a purely economic viewpoint.

That a man is taking an insurance policy, does not remove the fact he will have to die one day but the benefit of life policy which is payable in form of a premium to his dependants will help to boost the economic and social life of his immediate family members {dependants}.

Insurance has been explained by many people as the product of commerce. It wouldn’t have been easy for commerce and industry to operate without an organized insurance scheme.

The functions of insurance can be discussed in two ways, the primary and secondary functions.

Primary function: The primary function of insurance is to ensure that the financial loss of an individual is fairly and equitably spread over the insurance policyholders.

The policyholder or insured usually pays premiums into a common fund, out of which the unfortunate few who suffer losses are paid.

Secondary Function: The insurance industry provides a lot of secondary functions.

This includes financial security for businessmen and industrialists. The insurance industry provides employment opportunities to the masses.

Insurance helps in the development of local industries which are essential to community development.

Insurance policies attract profit out of the investments made and this helps in the nation’s economic growth.

Insurance removes one from an unexpected loss like medical bills. Insurance generates revenue for the government and also creates an avenue for employment.

Insurance boosts one’s confidence to run a business without any form of fear or tension.

Finally, insurance is a business that exists to ensure the existence and survival of other businesses because it makes it possible for businessmen and women to take risks and to make investments in every aspect of life having the hope of being protected when a loss occurs.

Types of Insurance

Generally, insurance companies divide the insurance business into different forms, some of the major ones are.

a. Life insurance

b. Fire insurance

c. Accident insurance

d. Marine insurance

e. Mortgage protection insurance

f. Agricultural insurance

g. Travel insurance cover.

Life Insurance: The purpose of life insurance is to provide against the loss of future income which may arise as a result of the premature death of the income earner.

The life insurance industry is divided into many groups, for example, ordinary life assurance and industrial life assurance.

The difference between the two is that the premium for industrial life assurance is payable at more frequent intervals, say weekly or monthly as the case may be.

industrial life insurance is not common in most countries like Nigeria and as such our effort will be channeled on ordinary life assurance which includes term life assurance, whole life assurance, and endowment assurance.

Whole Life Assurance: This is the type of policy the insured obtains for the benefit of beneficiaries.

However, a whole life policy is the type of life policy obtained for financial support for the family of a man when dies.

Premium may be paid as specified in the contract agreement called the life assurance policy.

Term Assurance: This is designed for a specific period in which the assurer in return for a premium undertakes to pay the sum assured in the event of the life assured dying within the period or term specified in the policy.

Endowment Assurance: This is a contract that specifies that the sum assured is to be paid to the policyholder, when the life assured reached a certain age or when he/she dies. The term can be 5 years, 8 years, 10, or 20 years as the case may be.

Fire Insurance: Fire insurance is designed to indemnify the insured for loss of or damage to buildings and personal property by fire, lightning, windstorm, explosion, and a vast array of other perils.

Marine Insurance: The function of marine insurance is to cover the risk of property loss, damage, or injury to third parties caused by perils of the sea { such as sinking, collision, stranding, or damage due to bad weather} and by theft, fire, jettison, piracy and other similar perils.

Accident insurance: Accident insurance may also be called casualty insurance and is a mishap that is neither looked for nor designed by the insured.

It is an outward event that is not expected or designed to occur. It may be classified into the following group.

i. Insurance of a person’s legal liability arising from accidents e.g public liability insurance.

ii. Insurance of a person against accidental injury, death, or sickness. An example is personal accident insurance.

iii. Insurance of property against accidental loss or damage e.g Burglary insurance.

iv. Comprehensive policy which is the combination of I, ii, and iii coverage.

Mortgage protection insurance: Mortgage protection insurance provides a contract of insurance against loss or damage arising from the use of motor vehicles, including third-party risks.

They usually cover third-party claims, fire and theft, and comprehensive policy. They are grouped into {a} Private cars {b} Commercial vehicles {c} Motorcycles and agricultural and factory vehicles.

Agricultural Insurance: Agricultural insurance is concerned with the insurance protection of farmers and investors in agriculture against risks of economic loss as a result of the operation of some of the risks connected to modern agriculture.

This policy covers loss, or damage to crops arising from such natural causes as flood, frost, locust and bad weather conditions may be covered against.

Also, livestock mortality from certain animal diseases is also covered.

Travel Insurance Cover: Travel insurance provides cover to personal luggage such as clothing, container, and those things which a person would normally have with him on holiday or business trips.

This trip, could either be by road, rail, sea, air, or a combination of any of them.

Summary

How do I know What Type of Insurance I Have? generally, to give response to this question, it is very important to understand the primary purpose of insurance which is to compensate or indemnify the affected person for his financial loss.

Insurance neither removes the loss nor does it undertake to stop the misfortune or disaster from happening.

All it does is minimize its pressure or negative effect from a purely economic viewpoint.

The need for insurance can be grouped into primary and secondary functions.