What You Need To Know About Insurance

Getting an insurance is one of those ‘life’ requirements that you should be looking into early in your career, especially now when you are still able to work and earn money. in addition to being better able to pay for the insurance, younger individuals also pay less. This is one of the principles of insurance. Since younger people are less likely to die, they are given cheaper rates as compared to older individuals.

Insurance protect financially you and your family in the future. Depending on the kind of insurance that you will choose to get, insurance can even provide for your health concerns, for your retirement and even for your death and burial.

But while it is important that we are protected against any unexpected eventualities, some people still shy away of availing insurance on their own, preferring their companies to do it for them. Like legal matters, all those insurance mumbo jumbo tend to confuse and sometimes even frighten people.

Here are some of he frequently asked questions about insurance.

What are the kinds of insurance?
There are two major types of insurance. The life and the non-life insurance. The life insurance, as the name suggests, protects the family of the person in case something happens to him. When a person who is insured dies, the money that he insured will be given to the beneficiary that he has chosen.

The non-life insurance is an insurance that protects properties. Under this category, there are several different types. There car insurances, which protect automobiles from wreckage in case of accidents; property insurance, which protects properties especially houses from fire and other forms of destruction; deposit insurance, which most banks have in order to protect their depositors from losing their money in case the bank suffers financial setbacks; and health insurance, which helps in covering for medical and hospital costs. Among the various non-life insurance, the most popular is the health and car insurance.

Some insurance also provide for the future. Some of the insurances are retirement plans and death plans, which covers for burial costs.

What is the difference between a premium and a face amount?
Premium refers to the amount that you have to pay every year for the insurance. Some insurance companies also offer to divide the premium into monthly installments to help their clients. The face amount on the other hand is the amount that you have insured yourself into. For example, if the face amount in your policy is set at $500,000, then your beneficiary will receive $500,000 when you die.

What do you mean by double indemnity?

Some insurance policy offer an accidental clause that would double the face amount in case death has been established as accidental. This is done to protect the insured’s family in case of an untimely death. Double indemnity means that the face amount will be doubled when death is accidental.

Is the beneficiary always the legal spouse?

No. Contrary to popular opinion, it is not always the spouse who is the beneficiary. It is up to the person to choose, who he names as beneficiary. It can be any member of the family as long as insurable interest is established. If in case, the children are named beneficiaries and are still not in legal ages, a guardian will be named to assume control of the money for them.

Protecting Your Personal Investment – Fire Insurance For Residential Property

Buying your first investment property or a house to shelter is a big responsibility. Maintaining and protecting it from damages and being destroyed is often the dilemma of a new house owner. Most property, be it residential or commercial, when it involves mortgage, the financing institute will require at least a basic fire Insurance policy to cover the property they are financing. This is to ensure that the bank interested is protected from losses due to fire.

When arranging for a fire insurance policy on your property, you need to understand some fundamental principles on how insurance works. One of the fundamental principles of insurance is the principle of indemnity. The principle of indemnity means that the insurance company will compensate you base your your losses before the incident happens, and not better. Simply put you cannot make profit out of insurance cover.

Most basic fire insurance policy will indemnify the house owner in the event that the property insured is destroyed by

  1. Fire,
  2. Lightning and/or
  3. Domestic gas explosion.

This might be differed in different countries, but the basic cover of fire insurance policy remains the same. The occurrence must be under any unforeseen circumstances, i.e. accidental and not intentional.

So the question now is how do you arrived at an adequate sum insured that is both acceptable to your bank and not wasting money unnecessarily. Most banks will require the house owner to insure a sum more than the mortgage amount. And this has became an unofficial yard stick. While this is often adequate for most cases but may not be enough when your mortgage amount is low as compared to the value of your house. In this situation, if the house is totally destroyed by the fire, the bank will be able to recover their losses from the insurance company enough to settle the mortgage outstanding amount, whereas you as a house owner will leave with ashes of the ruin.

In order to adequately cover your losses in the event of a fire and be able to build back your house, you need to determine an optimum sum insured. The determining factor is to ask yourself this question “What would be the cost of building the house back to it original state if it is totally destroy by fire? This sum normally excludes the cost of the land, the foundation, drainage and sewage system that might not be destroyed by fire.

It is always safer to insured a little higher than the cost of repairs or to reinstate the building but not too much higher. To insure a sum much higher than it should be will be a waste of money as insurance company will not pay more than what is justify. It would be ideal if you have a valuation report as , the valuation report will indicate the sum insured of a property which is much lower than the price you paid for the house You can just insure the recommended valued by the valuation company and this value will be a yardstick on the cost of the building in the event of a fire.

In all cases, always insured through a reliable and qualified insurance consultant and if in doubt, check with the relevant authority in charge of insurance.

Understanding the Principles of Insurance

The seven Principles of insurance state the different groups that are insurable. They are classified both for the sake of organization, and so that insurance companies can decide which area of expertise they would like to specialize in as an organization.

The first of the Principles of insurance is dealing with a large amount of the same type of policy. This is commonly thought of in auto insurance. Over a hundred million drivers in the United States alone carry auto insurance, and they do so because the companies have discovered the way to balance the risk with the proper funds.

Five of the seven principles involve loss categories. Definite loss deals with loss that is a guarantee, such as life insurance. Accidental loss would be associated with renter’s or fire insurance. There is not a guarantee of theft or fire, so each individual case is evaluated before coverage is assigned. Large loss deals with coverages of items that are of great value to the buyer. Great care must be placed in these policies, as the amount of capital needed to replenish these losses may be great.

The fifth loss principle deals with limiting the amount of loss from a catastrophe, such as an act of God. Acts of God include floods, hurricanes, and many other meteorological events. The insurance company takes care to write into the policy that a total amount of capital can be distributed based on the number of policy holders affected. For instance, if a thousand people with the same coverage are hit by a tornado, the company can limit their risk through this principle.

The final principle is the affordable premium. A balance must be struck between the client and the company as to what is a sensible amount to pay for the term of the policy. This is crucial to the success of the company, and is assessed at the outlook of the policy.

These Principles of insurance are the foundation of a healthy insurance group. Using them is the key to offering smart insurance and making a sensible profit.