Insurance is used to manage risk. The basic business agreement between an insurer and the insured is that the insurer agrees to compensate the insured for loss of property, life, or other thing in return for a premium. The details, as they say, are in the fine print!
Insurance coverage falls into six basic categories. Of course, not all types of insurance are required for each individual. However, most people will purchase at least two or three types of insurance throughout their life. Here are the six basic categories with short explanations for each.
Auto Insurance
If you own a car, you need auto insurance. In most countries, the minimum auto insurance coverage accepted is that which covers damage due to a motor accident that you caused. Insurance premiums are based on a number of factors including driving history, age, vehicle classification, average yearly mileage and more.Business Insurance
Most individuals don't need to take out a business insurance policy. These policies are intended for businesses in order to cover property and liability.
Disability Insurance
Disability insurance provides financial security in times of lost work ability, or disability to earn a living due to illness or accident. Disability insurance policies may be taken out by individuals as well as businesses seeking to cover their employees.
Health Insurance
Health insurance is provided in a number of manners depending on your residence. In the United States, many individuals are covered by employer provided health care policies, while others take out individual policies for themselves and / or their families. Health insurance covers expenses incurred in the treatment of illness, fees of doctors, medicine and hospital stays. Most health insurance plans require a deductible amount ranging from $10 to 20% of costs up to a certain threshold level.
Home Insurance
In the United States, home insurance is required if the owner takes out a mortgage on their home. Home insurance protects against damage from a variety of sources. However, not all catastrophes are covered and home owners should carefully screen their coverage to make sure that they are insured against floods, earthquakes, etc. if they live in a zone at risk.
Life Insurance
Life insurance helps to provide financial security in the case of death of a family member. It's crucial for the principal income earner to obtain life insurance in order to insure their family's well-being in a worst case scenario.
Special Types of Insurance
There are a number of special types of insurance for specific cases. In fact, it is possible to insure almost any type of item of situation. For example, if you have a violin and are musician you may want to purchase muscian insurance which insures your interment against theft or damage. More commonly, there are many types of income protection insurance, often known as disability insurance, which insures against loss of income due to inability to work from an accident or serious illness. Another type of popular insurance is mortgage insurance which pays off a mortgage in the case of death or disability of mortgagor. As we grow older, long term care insurance provides funds to pay for chronic illness, adult day care or nursing or home care.
Key Insurance Industry Vocabulary
Insurance Types
Auto Insurance
Business Insurance
Disability Insurance
Health Insurance
Home Insurance
Income Protection Insurance
Life Insurance
Long Term Care Insurance
Loss of Income Insurance
Mortgage Insurance
Related Vocabulary
accident
catastrophe
chronic illness
damage
disability
driving history
earthquake
fees
financial security
fine print
flood
illness
income protection
insurance coverage
insurance policy
insurance premium
insured
insurer
liability
long term care
loss of income
loss of property
mortgage
mortgage
serious illness
to compensate
to incur an expense
to manage risk
to take out a policy
treatment
vehicle classification
well-being
worst case scenario
For more specific vocabulary refer to this guide to key vocabulary and phrases used in the insurance industry.
