TYPES OF INSURANCE

An introduction to the most common types of insurance, including a step-by-step approach to buying insurance and an explanation of the different types of policies.

Insurance, We hate it. People have even compared it to the protection racket–you give the company your money and it (hopefully) takes care of you when you need it. Basically, the purpose of all insurance is to protect yourself or your family against the financial impact of a tragedy. Insurance is not to help you budget moderate-sized expenses, but to protect you against the truly catastrophic.
There are two ways to buy insurance. One way is to go to an agent to whom you explain your situation and trust him/her to suggest the insurance that is right for you. The other is do it on your own. You research the various types of policies available, decide what you need, and then comparison shop among the various companies.
The advantage of going to an agent is that an honest and competent one can review your situation and make suggestions. The advantage of going on your own is that you usually pay less for the same amount of insurance
STEPS FOR BUYING INSURANCE
Use these three steps when buying insurance:
Step One: Do I need this type of insurance at all? Figure out what the type of insurance you are considering covers and decide whether you need it.
Step Two: How much of this type of insurance do I need? Policies vary in how much they cover. Some cover specific dollar amounts. Others cover percent of loss. Some have a deductible. Others exclude certain types of damage. Look at these differences among policies and decide which one is for you.
Step Three: Where will I buy it? If you are working on your own, the web has a host of services to help you comparison shop among companies. Type in "insurance" on most search engines and you will come up with a number of sites. If you are working with an agent, you may be working with a captive agent which means (s)he can only sell you policies form one company or an independent agent which represents several.
When selecting a company, consider also whether the company is both able and willing to pay on claims should you make one.. AM Best and other companies rate the financial solvency of insurance companies. The web comparison shopping services usually include and explain the ratings. You can also ask the company itself or your agent.
Consider also the company's record for trying to refuse to pay claims. Your state insurance commission may have a record of complaints.
When buying any insurance, you will most likely save money if you pay annually or semi-annually. Sometimes buying several types of insurance from the same company will save you money. Often taking steps to make claims more unlikely, such as installing deadbolt locks or taking a safe driving course will lower your premiums. When shopping for insurance, also look into group policies offered by alumni associations, professional associations, or religious bodies. Usually you can forget about specialized insurance advertised on television with paid endorsers. They usually cover very little.

Major types of insurances are as mentioned below:
Life insurance: Descendent's family receives financial benefits. Life insurances also offer paid proceeds to the beneficiary.
Automobile insurance:Usually automobile insurances cover damages and legal financial expenditures of the automobile driver.

Health insurance:Health insurance cover the expenditures associated to treatment and medical expenditures.

Credit insurance:Borrowers often fail to repay debts,loans and mortgages due to certain unavoidable circumstances,credit insurances can be of great help during such crisis.
Property insurance:Property protection insurance provide protection from risks associated to theft,fire,floods etc.

FUNCTIONS OF INSURANCE

The functions of insurance can be discussed into the following ways:

1. Insurance is risk bearing : The main function of insurance is providing certainty of payment at the uncertainty of loss. The financial loss of the individual entity are equitably distributed over the many. In fire insurance, for example, the policy holders pay premiums into a common pool, out of which those who suffer loss are compensated.
2. Insurance Provides Saving : The main function of the insurance is to provide to the public on terms attractive enough to encourage them to insure and yet sufficient to offer a reasonable margin of profit.
3. Insurance Provides Protection : Insurance means protection against risk of loss. It covers the risk of loss. The insurance company agrees to give the payment of loss to the insured party against any actual loss or damage involved in business.
4. Insurance Stimulates Business Enterprise : Insurance ha made possible, and helps to maintain, the present day large scale industrial and commercial organization. A trade or businessman wants to carry on his business free from risks whenever possible. Insurance safeguards capital and at the same time it avoids the necessity on the part of industrialist and others of freezing capital to guard against various contingencies. Thus, insurance leads to development of business enterprises.
5. Insurance Encourages Efficiency : The insurance eliminates worries and uncertainty of risks. In personal form of insurance is relieved from hardship and anxiety. Thus, insurance improves not only his efficiency but the efficiencies of the masses are also advanced.
6. Insurance Promotes Loss Prevention : The community would suffer much greater economic impoverishment through material losses if it were not for the loss prevention measures of insurers. The insurance joins hands with those institutions which are engaged in preventing the loss of the society because the reduction is loss causes lesser payment to the assured and so more saving is possible which will assist in reducing the premium.
7. Insurance Provides Capital : Insurance provides not only protection but also capital to the society. Usually, accumulated funds through savings in the form of insurance premium invested in economic development or productivity plans.
8. Insurance Solves Social Problems : Some of the social problems which beset a modern civilized community are taken care of through insurance. At present, we have insurance against industrial injuries, road accidents, old age, disability or death etc. Thus, insurance act as a good instrument for solving many social problems.
9. Insurance Provides Capital : Insurance provides not only protection but also capital to the society. Usually accumulated funds are invested in economic development plans.
10. Insurance Solves Social Problems : Some of the social problems which beset a modern civilized community are taken care of through insurance. At present, we have insurance against industrial injuries, road accidents, old age, disability or death etc. Thus, insurance act as a good instrument for solving many social problems.
11. Use of Reserve Funds : Because of the investment policy of Insurers, their reserve funds are not static, but are used productively. Thus, results in a reduction of the cost of insurance to the insuring public.