Insurance is a means of protection from financial loss. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss.
An entity which provides insurance is known as an insurer, insurance company, or insurance carrier. A person or entity who buys insurance is known as an insured or policyholder. The insurance transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer’s promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms, and must involve something in which the insured has an insurable interest established by ownership, possession, or preexisting relationship.
The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated. The amount of money charged by the insurer to the insured for the coverage set forth in the insurance policy is called the premium. If the insured experiences a loss which is potentially covered by the insurance policy, the insured submits a claim to the insurer for processing by a claims adjuster.
TYPES OF INSURANCE
All too often we hear about various types of insurance policies without really understanding what they are and more importantly, what they protect. The truth is, there are two main types of insurance, namely life insurance and general insurance which covers different aspects in your life.
Life insurance is an insurance coverage that pays out a certain amount of money to the insured or their specified beneficiaries upon a certain event such as death of the individual who is insured. This protection is also offered in the case disabilty.
The coverage period for life insurance is usually more than a year. So this requires periodic premium payments, either monthly, quarterly or annually.
The risks that are covered by life insurance are:
– Premature Death
– Income during retirement
– Loss of Employment
– Medical Expenses
The main products of life insurance include:
– Whole life
– Life annuity plan
– Medical and health
General insurance is basically an insurance policy that protects you against losses and damages other than those covered by life insurance. For more comprehensive coverage, it is vital for you to know about the risks covered to ensure that you and your family are protected from unforeseen losses.
The coverage period for most general insurance policies and plans is usually one year, whereby premiums are normally paid on a one-time basis.
The risks that are covered by general insurance are:
– Property loss, for example, stolen car or burnt house.
– Liability arising from damage caused by yourself to a third party.
– Accidental death or injury.
The main products of general insurance includes:
- Motor insurance
– Fire and Special perils insurance
– Personal accident insurance
– Medical and Health insurance
– Travel insurance
– Professional Indemnity insurance
– Burglary and House breaking Insurance
– Goods-in-transit insurance
– Marine Cargo Insurance
– Contractor-All-Risk Insurance
– Employers’ Liability or Workmen compensation insurance
– Bond Insurance
– Aviation Insurance
– Cash-in-transit insurance
– Builders Liability
– Public Liability Insurance
– Plant-All-Risk Insurance
– Occupiers Liability Insurance
– Machinery Loss of Profit Insurance
– Electronic Equipment policy
– Consequential Loss Insurance
– Fidelity Guarantee
– Erection-All-Risk Insurance
– Machinery Breakdown Insurance
NOTE: “If a child, a spouse, a life partner, a relation or a parent depends on you and your income, you need life insurance.”
“You don’t save money to buy insurance; you buy insurance to save money”
“He who does not buy insurance, puts his family and business into risk”
Innocent Okoli is a Unit Manager at Aiico Insurance Plc, Lagos. You can reach him on 08035008822.