Insurance: Just in Case...

May 25, 2010Insuranceby EconomyWatch

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Because you never know when you'll need it.

Insurance (def.): Insurance is a policy from a large financial institution that offers a person, company, or other entity reimbursement or financial protection against possible future losses or damages.

Insurance is something that everyone will need sometime, and it's worth understanding it before you buy.

Insurance include vehicle insurance, which includes auto, motorcycle, and boat insurance, health insurance, life insurance, home insurance, travel insurance, personal property insurance, keyman insurance, dental insurance, rental insurance, and more.

What is Insurance?

Insurance is a form of risk-management which spreads the risk of many people in exchange for small payments from each individual. Specifically, insurance transfers some type of risk (accident, theft, natural disaster, illness, etc) from one person or group to a more financially-sound entity in exchange for a payment (also known as an insurance premium). Premiums are often annual or monthly, but depending on the type of insurance they can be at other intervals.

For example, a consumer can pay a certain amount to an insurer such as Motley Fool each year to insure that person's car. This sum represents the insurance company's assessment of the likelihood that the car will be damaged or wrecked. These data are normally taken from historical figures relating to the age, sex, profession, driving record, and accident history of the insured, as well as statistics concerning make and model of the car and its accident record, as well as the engine size, number of passengers, and even color of the vehicle.

Statistically, if the make and model of the vehicle in question, and/or its driver have been in numerous accidents, the insurance company will charge a higher premium in order to hedge expected losses. As the risk increases, so too do the premiums. In fact, sometimes, insurance companies will not even insure certain people and/or vehicles as the chance of them having to make a payout (in the event of an accident) will be almost guaranteed.

Learn of the types of policies like, business insurance coverage and solutions.

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