You Know How Insurance Works?
Insurance is a contract, represented by a policy, under which an individual or entity receives financial protection or compensation from an insurance company. The company collects the client's risk to make payments more affordable for the insured.
Insurance policies are used to hedge against the risk of financial loss, both large and small, which may result from damage to the insured person or his property or liability for damage or injury caused by a third party.
How Insurance Works
There are many types of insurance policies available, and nearly any individual or business can find an insurance company willing to insure them - for a price. The most common types of personal insurance policies are auto, health, home, and life insurance. Most individuals in the United States have at least one of these types of insurance, and auto insurance is required by law.
Businesses require certain types of insurance policies that cover certain types of risks faced by certain companies. For example, fast food restaurants require a policy that covers damage or injury from cooking in the fryer. Auto dealers are not exposed to this type of risk but do need protection from damage or injury that could occur during a test drive.
To choose the best policy for you or your family, pay attention to three important components of most insurance policies - deductibles, premiums, and policy limits. Insurance policies are also available for very specific needs, such as kidnap and ransom (K&R), medical malpractice, and professional liability insurance, also known as fault and negligence insurance. Thus our article about what insurance is. And is insurance important to your life? Read our next article to find out the importance of insurance for our safety.
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