How Insurance Works Made Easy
Everything you ever wanted to know about insurance. Well, maybe not everything, and maybe more than you really ever wanted to know, but with the articles ahead we will endeavor to impart some knowledge about what most people think is important to them about insurance.
Click Below To Read The Different Types of Insurance Made Easy:
1. Insurance Made Easy
2. Quotes For Insurance Made Easy
3. Rates For Auto Insurance Made Easy
4. Car Insurance Cheaper Made Easy
5. Liability Insurance For Auto, Home, Business Made Easy
6. Auto Insurance Coverage In Texas Made Easy
7. Home Insurance Coverage In Texas Made Easy
8. Business Insurance Coverage In Texas Made Easy
9. Health Insurance Made Easy
10. Life Insurance Made Easy
11. Specialty Insurance:
a. Boat Insurance
b. Motorcycle Insurance
c. ATV Insurance
d. RV Insurance
Texas Insurance Made Easy
So let’s get the ball rolling with that all-important burning insurance question: HOW DOES INSURANCE WORK?
The insurance industry safeguards the assets of its policyholders by transferring what is know as ‘Risk’ (exposure to the hazard or chance of loss), from you the individual or business to an insurance company for home insurance, renter’s insurance, auto insurance, boat insurance, motorcycle insurance, life insurance, health insurance and business insurance for the most part.
Insurance companies act as financial intermediaries in that they invest, or lets say re-invest, the Premiums (money) they collect from you for the privilege of providing the service of ‘Insuring You’ against ‘Risk’. They also purchase ‘Re-Insurance’ (they buy insurance from other bigger insurance companies that specialize in certain types of insurance risk) to lower their exposure to ‘Loss’. It’s how the insurance industry spreads risk exposure, reduce loss and controls their overall cost of doing business. If insurance companies didn’t do this, insurance over time would become exorbitant. Insurance is a necessary evil in today’s society, as stated here very simply it protects you against Loss.
There are three main insurance sectors:
- Property and Casualty (know as P&C) consists mainly of auto insurance, home insurance and business insurance
- Life consists mainly of life insurance and annuity products
- Health Insurance is offered by private health insurance companies and some P&C and Life Insurance Companies, as well as by Government Programs such as Medicare
Auto Insurance offered by an insurance company protects against financial loss in the event of an accident. It is a contract between the policyholder (you) and the insurance company. The policyholder agrees to pay the premium and the insurance company agrees to pay losses as defined in the policy because of an accident.
Home Insurance or Renter’s Insurance offered by an insurance company provides financial protection against disasters (causes of loss). They are typically package policies, which means that they can cover both damage to property as well as liability, your legal responsibility for bodily injury or property damage a policyholder or family member living with them cause to other people. (Property damage to others in liability only is typically covered up to $250 to $500 unless negligence can be proven.)
Business Insurance requires most businesses to purchase at least the following four types of business insurance:
1. Commercial Property Insurance
2. General Liability Insurance
3. Commercial Auto Insurance
4. Workers Compensation Insurance
These are business basics; businesses should always consult a business insurance agent to review other forms of specific coverage as well.
Some small to medium businesses can purchase what is called a Business Owner Policy (BOP), it is a form of a packaged policy that is cost effective and offers a variety of valuable coverages that a small or medium business would find hard to purchase separately as some larger businesses must do because of the type of business they are or because of their risk exposure.
Life Insurance can be the cornerstone of sound financial planning. Did you know it can be an important tool in the following situations?
- You can use it to replace income
- Pay final expenses
- Create an inheritance
- Pay what are called “Death” Taxes for Federal and State “Estate” Settlements
- Create a source of savings (Whole Life Insurance or Permanent Insurance only)
There are two types of Life Insurance: Term Life, or Term Insurance, is the simplest form of life insurance. It pays only if death occurs during the term of the policy, which is usually from 1 to 30 years while Whole Life or Permanent Insurance pays ‘death benefits’ when the policyholder dies or prior to ‘Maturity’ (that may occur at age 120 for example). So if you live longer than lets say 120 you would only receive back the ‘cash value’ of your particular policy type (for example), not the death benefit portion from that particular insurance company. You should review these important factors with your life insurance professional.
Health Insurance offered by insurance companies protects against the costs of medical services and are programs that help pay for medical expenses. Health insurance follows the current trends of the United States Health Care System overall. It relies heavily on private health insurance, which is the primary source of coverage for most Americans.
According to the CDC (Center for Disease Control and Prevention), approximately 58% of Americans have private health insurance. Public programs provide the primary source of coverage for most senior citizens and for low-income children and families who meet certain eligibility requirements. The primary public programs are Medicare, a federal social insurance program for seniors and certain disabled individuals, Medicaid, funded jointly by the federal government and states but administered at the state level, which covers certain very low income children and their families, and SCHIP, also a federal-state partnership that serves certain children and families who do not qualify for Medicaid but who cannot afford private coverage. Other public programs include military health benefits provided through TRICARE and the Veterans Health Administration and benefits provided through the Indian Health Service.
Special Note: Did you know Texas (as an example) has what it calls its own ‘Risk Pool’? It offers health insurance to indaviduals who have been denied health care coverage elseware (qualification is required). Contact TDI (Texas Department of Insurance) for more informatin about this vital service, as well as Small Business Health Plans help.
Disclaimer: Content and illustrations represented and provided here-in are for informational purposes only. This information should not be misconstrued to be considered Insurance or Binder Coverage for Insurance. Always consult a licensed insurance agent in the state of Texas for specific insurance coverage types and needs analysis as insurance policies in Texas vary.
Sources used to gather content for this Article and all Articles provided in this Series include:
The Costlow Insurance Group, Inc. / www.costlowinsurance.com
a. The Insurance Information Institute / http://www.iii.org
b. The Texas Department of Insurance / http://www.tdi.state.tx.us