Insurance is an agreement between an insurance company and an individual, whereby the insurance company promises to make good the losses of the individual in case of an emergency or accident.
Normally, the insured individual pays a premium in return for the promise made by the insurance company. The insurance company takes this risk of providing a high cover for a small premium because very few insured people actually end up claiming the insurance
An insurance policy outlining the conditions and circumstances under which the insurance company will pay out the insurance amount to either the insured person or the nominees is availed to both parties.
Types of Insurance
- Life insurance: The cover ensures one’s dependants are financially secured in the event of the breadwinner’s untimely demise.
- Health insurance: The insurance caters for treatment, hospitalization and medical costs in case of illness.
- Education insurance: The cover provides funding for a child’s educational expenses.
- Car insurance: It cautions the owner of the vehicle from meeting expenses in case of an accident or theft. May also compensate for damages to one’s car during floods or earthquakes. Additionally, it covers third-party liability where one has to pay damages to other vehicle owners.
Benefits of Insurance
- Improves an individual’s credit score.
- Payment of losses by indemnifying individuals and organizations for covered losses.
- It reduces the burden of uncompensated accident victims.
- Efficient use of an insured individual’s resources by setting aside a large amount of money to pay for the financial consequences of the risk exposures that can be insured.
- The uncertainty of paying for losses out-of-pocket is reduced significantly hence ensuring family and business continuity.