Insurance policy is a written legal agreement, but wait, stop, let’s face some facts before we continue! Life is full of uncertainties. No one can predict what will happen in the next minute. When unforeseen circumstances occur, we are left hopeless. That’s why insurance is the way to go. Way back at school, I used to bombard my Business Management teacher with several questions when we were treating the topics, insurance, insurance terms, insurance types, and benefits. I thought insurance companies are thieves, little did I know that they are safe havens.

Insurance gives you peace of mind against the unexpected. Our lives and properties are surrounded by the threat of death, disability, and destruction. These risks may result in financial losses. Insurance is a prudent way to transfer such risks to an insurance company. If you’re in the state of being unsure of something, get insurance to cover you! Many insurance policies cover almost anything for your safety and needs. It’s all your choice to determine which one you attach more importance and value to than others. It all depends on your needs.

In this article, we will discuss what insurance is, the types, and the benefits thereof. Consider examining this insurance article carefully so that you make the best choice of insurance policies.

What is Insurance?

Insurance is a legal agreement between two parties, the insurer, and the insured. The “insurer” here refers to the insurance company and the “insured,” the individual covered. The insurer, (the insurance company) promises to make good the losses of the insured on the happening of the insured contingency, unforeseen event.

The contingency is the event that causes a loss. It can be the death of the policyholder, a member of the family, or damage or destruction of a property. It’s called a contingency because there’s uncertainty regarding the happening of the event. In return, the insured pays a premium in return for the promise made by the insurer. An insurance premium is just an insurance payment; it can monthly, or yearly.

How Does Insurance Work?

The insurer and the insured get a legal contract for the insurance, which is called the insurance policy. An insurance policy is a written contract or certificate of insurance. The insurance policy has details about the conditions and state of affairs under which the insurance company will pay out the insurance amount to either the insured person or the nominees. Which is hereby called indemnification.

Indemnification is the sum of money paid in compensation for loss or injury by the insurer to the insured considering the insurance policy. The insurer makes payment of the insurance monthly or yearly as stated in the insurance policy, refers to as insurance premium. When the insured event or circumstance under the insurance policy occurs, the insurer will indemnify the insured. Sometimes, the amount paid to the insured depends on the degree of damages or injuries.

Any individual or company can seek out insurance from an insurance company, but the decision to provide insurance is at the discretion of the insurance company. The insurance company will evaluate the claim application to make a decision. Generally, insurance companies refuse to provide insurance to high-risk applicants. 

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The Types Of Insurance Policies

There are several types of insurance policies in existence now. Some are common to most countries and some to are limited to the country you’re living.

Life Insurance

Life Insurance

As the name suggests, life insurance is insurance on your life. Death is inevitable, it will surely occur, that’s why a life insurance policy is often referred to as “life assurance”. Under life insurance, the policyholder’s beneficiaries are compensated in case the policyholder expires during the term of the policy. A beneficiary is a person or entity named in a policy who receives benefits, such as a spouse and children.

Not only that, death can be expensive in some countries; from settling an estate to planning a funeral and the associated costs can give a setback. Nevertheless, a life insurance policy will ease the financial burden placed on a surviving spouse, children, and other dependents. This is a good policy to consider at all times because death will not give notice before coming. 

Life insurance is also a way for a parent or parents to ensure that their kids can still go to college if something should happen to one or both of them. You buy life insurance to make sure your dependents are financially secured in the event of your untimely demise. Life assurance policy is good for people who are the breadwinner of the family, hence, if you’re with dependents, consider this insurance policy.

Life insurance is also available for business owners. A life insurance policy can insure against business losses. “A key-man policy” ensures that if a key business partner or partners, or key employee or employees were lost in a fatality, the remaining partner or partners would have the financial resources to continue the business and find replacements for those individuals.

If you’re unsure whether a life insurance policy would be useful for you, consider asking yourself the following questions:

  • What immediate financial expenses would your family face when you die?
  • Do you have some outstanding debt?
  • What about funeral costs?
  • How long would your dependents need financial support if you passed away today?
  • How much estate would you like to leave behind?
  • What about my children’s education?

Health Insurance

Insurance Explained: 8 Types Of Insurance Policy And Who Need Them

Health insurance is one of the most important types of insurance. What is health insurance? Health insurance is a contract between a health insurer and a policyholder that requires the health insurer to pay for all or at least a portion of medical costs. Who needs a health insurance policy? The answer is everyone! You need a health insurance policy for both expected and unexpected health care expenses. This may include but is not limited to routine medical checkups and medications, emergency stays, and serious surgeries. Out of pocket settlement of bills is not easy these days as some health conditions are sudden and demand quick attention.

Good health is important, how healthy you’re can determine how rich your mind is and how rich you can be, generally. Good health is what allows you to work, earn money, pay off bills, look after yourself and your family, and enjoy life. Without good health, you can’t do anything! What if you develop a serious illness or have an accident without being insured? You might find yourself paying large medical bills or even unable to receive treatment because of a lack of funds.

It’s heartbreaking to know that uninsured individuals mostly have higher costs for emergency medical care but are the least likely to be able to afford it. They either borrow or required six or more months to settle the bills. Purchasing health insurance is an integral part of managing key personal financial risks. Not having a health insurance policy can be financially devastating to households because of the high cost of care. It is a fact known that some people are bankrupt because of huge medical bills.

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Home Insurance

Home Insurance

What is home insurance? The home insurance policy covers loss or damage caused to your home due to accidents like fire, lightning, earthquakes, and other natural calamities or perils. Homeowners insurance covers the house you reside in and any associated structures, such as a porch, fence, garage, and balcony. Do you know that there’s an insurance policy for home renters?

If you rent a home, a renter’s insurance policy is available. Your landlord’s insurance covers the structure itself, but your items can add up to a lot of money. In the event of a burglary, fire, or disaster, your renter’s policy should cover most of the costs. Who needs home insurance? Homeowners, landlords, and home renters.

Auto Insurance

Auto Insurance

What is auto insurance? Auto insurance policy covers cars, motorcycles, trucks, and other vehicles. It shields you, your vehicle, other vehicles, properties on board, and pedestrians. The incident could be reckless driving, an accident, or theft. Who needs auto insurance? Car owners and drivers.

Driving while uninsured is against the law and dangerous because the driver and their vehicle and other third parties aren’t protected against an accident, collision, or general theft and vandalism. In the US of A, most states demand that you have basic auto liability insurance. This covers legal fees, injury or death, and property damage to others when you are legally responsible.

Auto insurance is crucial if you own a car or drive one. It’s required by law everywhere to get auto insurance, even not at all, third-party motor insurance. Not only is it required in most states, but also car accidents are expensive. It can cost you a substantial amount of money without injuries and even more if a crash is fatal. These costs come from medical expenses, vehicle damage, wage and productivity losses, and more.

If you’re buying a car with a loan, consider adding comprehensive and collision coverage to your policy. These pay for damages to your vehicle due to car accidents, theft, vandalism, and other hazards. They’re especially vital if repairing or replacing your car would create a financial hardship for you.

Drivers need to purchase uninsured motorist coverage to protect themselves and their passengers from the growing number of uninsured and/or underinsured drivers on the road today. Uninsured motorist coverage applies in situations where the at-fault vehicle owner and its driver either lack bodily injury coverage or fail to maintain bodily injury with enough coverage. 

Disability Insurance

Disability Insurance

Your ability to earn income and live your dreamed life is important. That’s why many people think, their home or car is not their greatest asset. Rather, the ability to earn an income is their priority. Yet, many professionals do not have a disability insurance policy. We think we are okay, however accidents occur that made some people disabled, they can’t do anything to support themselves nor the family.

A disability happens more often than people think. That’s the reality, we should not run away from it. Disability insurance is the only type of insurance that will pay a benefit to you if you are ill or injured and can’t do your job. That’s the main reason why young men and women need it! You may have disability benefits through worker’s compensation for injuries that happen while you’re on the job. However, some of these benefits do not cover off-the-job injuries or illnesses like cancer, diabetes, and multiple sclerosis.

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A disability insurance premium is often based on age, occupation, salary, and general health condition. It’s not expensive as people think. It can fit into your budget! For instance, in the USA, usually, the premiums of disability insurance cost two cents for every dollar you make.

If you’re unsure about going in for disability insurance, ask yourself the following questions:

  • Are you young?
  • Is your family young?
  • Are your children still going to school?
  • Is your work prone to injuries?

These and other questions will help you decide whether to purchase disability insurance.

Education Insurance

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Education insurance is similar to life insurance but differences exist. Education insurance is one of the greatest financial planning I’ve ever seen. It’s a saving tool. Education insurance is a great way to provide a lump sum of money to finance your child’s education when your child reaches the age for higher education and gains entry into college.

Under this insurance, the child is the life assured or the recipient of the funds, while the parent or legal guardian is the owner of the policy. You can estimate the amount of money that will go into funding your children’s higher education using the Education Planning Calculator. If you are young and your marriage too is young, then this insurance policy is for you!

Travel Insurance

traveling insurance

A travel insurance policy is a way to cover trip cancellations, lost or misplaced luggage, travel accidents, and even medical expenses while on the trip. If you travel often, consider this type of insurance!

Typical medical health insurance policies only offer a travel insurance element to the extent that it involves emergency care. There are restrictive provisions on what is and isn’t covered, so those who are planning to travel would do well to purchase a separate travel insurance policy with the specific benefits that they are looking for. The types of travel insurance that can be purchased differently as single, as a whole, or as a combination of one or two, include:

  • Major medical
  • Accident
  • Evacuation, that’s immediate transport to home in the event of a major illness or accident.
  • Trip cancellation or interruption

If you want peace of mind, consider purchasing a comprehensive travel insurance policy. 

Pet Insurance

Insurance Explained: 8 Types Of Insurance Policy And Who Need Them

Pet insurance, which is mostly for dogs and cats, covers all or part of veterinary treatment when a pet is hurt or sick. There are two types of pet insurance. A wellness plan that covers routine visits and shots, and a health insurance plan that is more comprehensive of genetic diseases and major surgeries. Pet insurance is a great thing to have for your pets.

Some major surgeries and hospitalizations for illness can be very costly. Pet insurance can help your bill go down. Why do you need pet insurance as a pet owner? Paying into pet insurance is more cost-effective than paying a lump sum out of pocket to your vet should your pet need emergency medical treatment.


Insurance is important, examine yourself and purchase one to meet your needs. Ensure that you have done your research before choosing and investing in an insurance policy. Insurance is a haven!


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