What kind of insurance do I actually need?

what are the 4 types of insurance?

Iu2019ll start the answer to this question with a question: what is insurance?,Insurance is the pooling of risk.

People enter into a pool.

Each person pays the expected cost of the risk being insured against.

The insurance pays out each personu2019s actual cost, should they befall said risk.

By doing so, they pay an amount they can afford (a premium) but avoid having to pay out an amount they canu2019t afford (massive medical bill, or rebuilding their house after a fire).

,There is one slight twist; each individualu2019s premium will actually be slightly higher than their expected cost.

This pays for the insurance companyu2019s operation (and, if a private company, its profits).

All else equal, you would buy insurance if the value, to you, of avoiding the cost of the risk is worth more, to you, than this u201cexcess premiumu201d.

It is an individual choice (with some exceptions discussed below).

,A classic example is life insurance.

When a person dies, there are a lot of costs that must be dealt with.

In addition, if said person has dependents, the loss of the deceasedu2019s income may affect their lifestyle (or health, safety and so forth).

Becuase mortality rates are fairly low for Americans between the ages of 30 and 50 (among others), certain types of life insurance (specifically, term insurance) are very inexpensive.

Therefore, it makes sense for a lot of people to carry at least some amount of life insurance.

You can apply the same logic and analysis to many other types of insurance.

,Now, onto the exceptions.

It turns out that there are many cases where some entity effectively forces you to buy a certain type of insurance.

For example, if you buy a home and get a mortgage, the bank will almost certainly force you to buy home insurance.

The reason is that the bank is relying on your property being intact as collateral on the mortgage.

If it burns down, they will take (some or all of) the insurance payout (in many situations).

,Then, there is the government.

Forty-nine out of fifty U.

S.

states force drivers to carry auto insurance.

The reason is that, if you cause damage or injury with your vehicle, you are liable for a potentially large payout.

The person who was insured or faced property damage may want to collect more money than you have.

It benefits society to require people to have insurance to pay this amount, rather than car crashes regularly cause bankruptcies.

,In addition, every country with a successful health system requires people to carry health insurance.

The reason for this is similar.

Every year, some of us will face massive health bills: cancer, diabetes, car crashes among many of the causes.

If people are not forced to carry insurance, they will show up to the hospital and be given treatment.

As with the car insurance mandate, it makes sense for society to require people to carry health insurance, rather than driving those that have high medical costs into bankruptcy.

It is literally an economic requirement of any stable health insurance system.

What are the 3 main types of insurance

Though there are many type of insurance but can be categorised in three type of insurance .

,Life insurance covers the risk of death .

This is acontract for defined period .

This is not an indemnity contract .

,Health insurance where risk of financial loss due to health care is covered .

This is an indemnity contract and one year renewable contract .

,General insurance covers the risk of financial loss to other assets .

This is an indemnity contract and one year renewable contract .

What is insurance policy

An insurance policy is a legal contract which binds the insurer and the policyholder.

Under this contract, the policyholder has to pay a premium to the insurance company and the insurance company compensates the policyholder in case of unforeseen event.

The contract is specified to terms and conditions which need to be taken care of while opting for the insurance policy.

Thus, insurance is a risk mitigation tool.

There are two types of insurance: General Insurance and life insurance.

,General Insurance: General insurance or non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a particular financial event.

General insurance is typically defined as any insurance that is not determined to be life insurance.

,Life Insurance: A life insurance policy is a contract with an insurance company.

In exchange for premium payments, the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries upon the insureds death.

Types of insurance PDF

Excellent question.

,As Jeremy Bedsaul suggests, in the US, this is ultimately up to the individual state insurance regulations and statutes.

,An example of state regulations that address this type of question can be seen on the New York State Department of Financial Services website.

,Online Insurance Policy Delivery SystemElectronic Delivery of Executed Insurance Policies via the InternetElectronic Delivery of Insurance PoliciesOn personal lines, insurance companies seem to default to sending a printed version of the policy unless the client requests electronic delivery.

However, many insurance companies are now offering u201cgreenu201d or u201cpaperlessu201d discounts if you opt for policy delivery and billing via email or other electronic means.

,An increasing number of commercial lines carriers are printing declaration pages and providing the actual policy documents/forms on electronic media such as CDu2019s, thumb drives and emailed PDF files.

,The trend is to cut down on the use of paper documents sent through traditional USPS mail - towards - delivery through electronic channels.

Importance of insurance

Assuming you are talking of life insurance.

Its important as a protection against any emergency.

In case of unfortunate death, the sum assured n other benefits (if applicable in the policy) is paid immediately to nominee so that your loved ones can maintain the same standard of living and can meet expenses of important events like education, marriage, retirement etc.

If you survive thru the policy you enjoy all the benefits of policy plus get the sum assured on maturity.

,Mainly, there are 3 types of life insurance.

Term plan is you get a large cover for a small premium.

The sum assured is paid to nominee on death of proposer.

Though now several other benefits are available in term plan.

Then there are traditional plans where you pay premium for a specific period n get sum assured on maturity of policy plus bonuses etc.

Both living n death benefits are available here.

Child education, pension, retirement, monthly income plans fall in this category.

Third, there are ULIP plans which are market linked.

Minimum lock in is 5 years n you get fund value on maturity.

Life insurance is applicable here too.

,Thanks