With insurance, you can be able to secure a contract that will sustain you when you face some challenges in life.
Do you know that the life and other activities of every individual are surrounded by a lot of risks?
This risk can lead to destruction and uncertainties that happen to us at unawares. Some of these challenges may arouse as a result of financial losses.
As such things do happen to humans, insurance can serve as a way to eliminate some of the expenses that will emerge as a result of these risks.
Note: We used the word “indemnity” in place of “insurance” in several places in this content.
What Is Insurance?
Insurance definition in simplified English can be defined as a legal agreement between two parties – probably an individual and a company or a set of people and a company.
In other term, indemnity is a contract that is governed by a policy that allows an individual or an organization to receive or obtain financial protection (or reinforcement) against any losses that may arise in the future, from an indemnity company that they reached the contract with.
When it comes to insurance, the company is the insurer while the individual is the insured.
The insurance company (the insurer) will make everything possible to solve the individual’s risk when an emergency that is involved in the indemnity policy happens. The indemnity company will take care of every expense that will be involved in the individual’s life.
Moreover, indemnity policies help to seal this agreement which the indemnity company agreed to handle the financial losses that may arise in the future.
This loss includes both big and small including life, property, damages, and even injury that is caused by a third party.
Meanwhile, before any company will insure an individual for any type of insurance, the individual will commit with some money that the indemnity company will use to be operating the businesses that are ongoing in the company.
So to some extent, the indemnity company sometimes doesn’t encounter any losses even when they spend a lot on a single individual because of uncertainties.
How Insurance Works
To understand how insurance works, you need to know that the insurer (the indemnity company) and the insured (the individual) will first get a legal contract for theindemnity and this contract is governed by the indemnity policy.
This insurance policy usually contains all the terms and conditions that will make the indemnity company be able to pay the insured person the indemnity amount when the agreed uncertainty occurs.
You should know that indemnity is a way of securing or protecting one’s future or family from any financial losses that may arise in a meantime.
Also what an individual will get in return for obtaining indemnity from any indemnity company is far greater than the commitment money that he/she paid when before the indemnity is agreed.
Someone may be asking – how do these indemnity companies make their profit, since they take a high risk of one’s financial losses?
But from statistics, only a few people that are under indemnity end up claiming their indemnity from these indemnity companies.
Because of this reason, indemnity companies decide to take the risk of paying an individual in return for the small amount of money that he/she paid at the agreement of the indemnity.
Although every individual can demand indemnity from any indemnity company, the indemnity company will check if they are going to meet up with the huge money that they will pay the individual in the future if an uncertainty occurs.
In as much as this, the indemnity company refuses to give or provide indemnity to high-risk applicants (individuals or organizations).
5 Types of Insurance For everyone
Because life can’t be predicted, we as humans cannot prevent some uncertainties from occurring, but we can get some protection from indemnity companies when such things happen.
In as much as indemnity is meant to protect us, most times it is hard for individuals to determine the type of indemnity that they need.
When planning for the type of indemnity that one needs, it is advisable to consider: age, children, employment, lifestyle, and other things.
From the above brief description, 5 major types of insurance are recognized in the whole world today. They are life, health, car (auto), education, and home insurance.
Life insurance is the type of indemnity that secures any uncertainty that will happen to your life as a human. We have placed life indemnity as the number one on our list because life is the most important thing on earth.
If for example that you’re the breadwinner of your family, life indemnity secures your life as the head of the family. This means that if any incident happens, the indemnity company will take care of your life.
One of the greatest advantages of life indemnity is that it also covers one’s funeral expenses in case if the individual involved in the life indemnity later died.
As one that has a family, it is advisable that you seek life indemnity, to make sure that any unplanned circumstances that will happen to you as the head of the family in the future are already settled.
The life insurance company will not just take care of one’s funeral, but they will also take care of outstanding loans, mortgage payments, credit card debt, child care, taxes, etc.
In as much as this, if the policyholder expires during the policy period, the life indemnity company will compensate the placeholder’s family for initiating the life indemnity.
Health insurance is the type of indemnity that covers medical costs for expensive treatments. As a family man, while you’re under health indemnity, all your expensive medical treatments will be paid off by the indemnity company that you agreed with.
Assorted types of health indemnity cover different aspects of illness and diseases that affect human life.
In as much as this, you can buy an indemnity policy for your health for some specific areas; probably some dangerous diseases that cost a lot of money to be cured.
Moreover, the premium policy for health insurance covers treatment, hospitalization, and even medical cost.
Car insurance (Auto Indemnity)
Currently in the world today, as a car owner, you need to look for car insurance that will cover any uncertainties that you may face in the future.
If you’re under car insurance or auto indemnity, any unfortunate accident that will happen while you’re with your car, the indemnity company that gets you insured will take care of the expenses without you contributing any amount as support.
In as much as that, some car indemnity companies also compensate the individual that is involved in the crash for damages that affect his car maybe during natural calamities like earthquakes, floods, etc.
Anyone that is under auto indemnity, when an accident happens, the indemnity company will as well pay for damages that affect the other car that was involved in the crash.
Do you have children that you don’t want anything to stop their education no matter how bad situations can be sometimes? Then education insurance is very needful for you.
The education insurance serves as a savings account for families, this means that your child’s education is guaranteed even if you lose your job or when you’re no longer financially stable.
People that are involved in education insurance have seen that it helps them to save a lot of money that will fully sponsor your child’s higher education when the child reaches 18 years old.
In education insurance, your child serves as the life that holds the indemnity while the parents serve as the owner of the indemnity.
Whether you’re working in a company, sea, air, in the space, etc. everybody needs a home for resting and also for relaxation without daily or weekly charges.
Home insurance will help an individual to retain his house even when unimagined accidents and natural calamities hit the building.
If for instance, something happens and your house catches fire and burn, if you’re under a home insurance company, they will take care of all the expenses that it will take to rebuild your house to its standard form.
Home insurance also covers other instances that will affect your building such as earthquakes, lightning, flood, etc.
What do you mean by insurance?
Insurance simply means a contract that is represented by a policy that enables an individual or entity to receive financial protection against uncertainties or losses directly from an indemnity company.
The insurance company is ready to take a risk on behalf of the clients that are being insured.
If the individual falls victim to the calamities that he/she is being insured of, the indemnity company will pay all the debt that will arise because of that uncertainty.
What are the types of insurance?
The five core types of insurance that we need today are life insurance, health indemnity, car (auto) indemnity, education indemnity, and home indemnity.
What is insurance and how it works?
Insurance can be best described as a contract that transfers the risk of financial loss from an individual or business to an indemnity company.
This indemnity company collects a small amount of money from the individual that seeks the indemnity and agrees to pay the debts that may arise as a result of uncertainty within the agreed policy in the indemnity.
Moreover, indemnity is divided into two major categories which are: Life indemnity and Health indemnity.
What type of indemnity do I need?
As an individual, you need Home or property indemnity, life indemnity, disability indemnity, health indemnity, and automobile indemnity.
These types of indemnity are recommended for everyone who tends to have rest of mind even when uncertainties happen.
What are the two major types of insurances?
Below are the two major types of insurance:
- Life Insurance.
- General Insurance.
What is the benefit of indemnity?
One of the most important benefits of indemnity is the payment of losses that occurs as a result of the unplanned uncertainties that happen in our daily lives.
In as much as the indemnity companies agree to pay for these losses, there is a policy that governs the indemnity contract both for individuals and organizations as well.
Another major benefit of indemnity is that it helps to manage cash flow uncertainty. This means that indemnity provides payment for losses when they occur.
What are the disadvantages of indemnity?
Below are some Disadvantages of Insurance
- It does not bear every type of loss that occur in individual and business.
- Long Legal formalities.
- Fraud Agency.
- Not for all People.
- 5 Potential crime incidents.
- 6 Temporary and Termination.
- 7 Can be Expensive.
- 8 Rise in Subsequent Premium.
What are the main functions of insurance?
Below are some Primary Functions of indemnity
- It provides certainty.
- It provides certainty of payment at the uncertainty of loss.
- Provides protection.
- Prevention of loss.
- It Provides Capital.
- It Improves Efficiency.
- It helps Economic Progress.
What are the four benefits of indemnity?
Below are some Benefits of indemnity to society
- It is an important risk mitigation device.
- The companies provide the required funds for infrastructure development.
- It provides a sense of security.
- It provides security to the insured during his life and to his dependents.
- It provides employment opportunities.
What is the role of insurance in society?
Some types of indemnity such as life indemnity grants protection against loss of human wealth as well as human life.
Apart from life indemnity, general indemnity has policies that govern and protect the individual against some losses such as accidents, earthquakes, fire, etc.
In as much as this, both life indemnity and general indemnity offer protections and stabilization in the individual’s health, properties, and finances.
The six basic principles of insurance
In the world’s economy today, there are major six (6) basic principles that govern every indemnity policy that must be agreed upon. They are Utmost good faith, proximate cause, indemnity, insurable interest, subrogation, and contribution.
What are the characteristics of indemnity?
Below are some of the characteristics of indemnity:
- Being a contract
- It’s an undertaking of risk
- A cooperative device
- Payment of policy amount on the happening of events
- Contract of adhesion
- Development of larger industries
- Provide protection
What is the most important insurance principle?
Among all the principles of insurance, “indemnity” is the most important of all, because it is the principle that rooted the insurable value of the interest that will be involved in the indemnity.
What is insurance control?
Insurance control is simply what can be done to minimize some risks that will go against the indemnity policy.
It is a set of risk management practices that are designed to eliminate or reduce claims that will be made against the indemnity policy.
What is the TPA department?
TPA which stands for Third Party Administrator is a company/agency/organization holding license from Insurance Regulatory Development Authority (IRDA) to process agreements in the indemnity policy.
They also provide facilities that come as a result of the outsourcing entity of an indemnity company.
What does LP mean in insurance?
LP in insurance means Life Policy.
What is insurance risk?
Indemnity risk is simply the chance of something harmful or unexpected happening within the indemnity agreement policy.
In some types of insurance, this may include damage of properties, loss, injury, death, etc.
This indemnity risk always helps the insurer (indemnity company) to know the amount that will charge anyone that needs that indemnity.
What Is Marine insurance?
Marine indemnity is the type of indemnity that covers loss or damage of ships, cargo, and other transportation that is being carried out by the water.
This marine indemnity ensures that all the activities ranging from the time that the ship sailed to its final destination are well secured and covered.
When a lot of products are being transported by the sea, marine indemnity is used to cover it.
How do you explain insurance to a child?
The video below explains how one can explain indemnity to a child.
How do insurance companies make money?
indemnity companies make money in several ways. Some of them include: Through underwriting.
Through underwriting is the process by which the insurer (indemnity company) chooses the risk they want to insure and then decides how much they are going to charge the individual or organization that is seeking the indemnity.
Indemnity companies also make money by investing the money they collected from the people or organizations that they insured.
The participants in your insurance contract and their role
Below are the core participants that are involved in an insurance contract and the role they play.
- An indemnity policy is a contract between the insurer and the insured.
- The insured is the person whose life is being covered against the risk under the policy.
- The insurer is the indemnity company that provides the indemnity cover.
What types of insurance are not recommended?
Below are the 5 Types of Insurance You Don’t Need
- Mortgage Life indemnity. Some indemnity agents will try to convince you that you need mortgage life indemnity.
- Identity Theft indemnity.
- Cancer indemnity.
- Payment protection on your credit card.
- Collision coverage on older cars.
Top richest insurance companies in the world
Below are the world’s largest insurance companies by net premiums written:
|Ranking||Insurance Company Name||2019 Net premiums written (US $ 000)|
|1||UnitedHealth Group Incorporated||189,699,000|
|2||Ping An Ins (Group) Co of China Ltd.||110,746,845|
|4||China Life Insurance (Group) Company||97,744,867|
In as much as there are several types of insurance that one can get involved in, as an individual or organization, you can get all these indemnity within your nationality or from other countries, or even online.
All you need is to pay the one-time payment that the indemnity company will demand from you.
Also buying an insurance policy demands that you will sign some forms, of which those who intend to get insurance from online companies, will need to fill the form that the indemnity company website will give to them.
Moreover, it is advisable that as one seeking for indemnity company, that you do in-depth research so that you will not meet the wrong indemnity company for your need.