All You Need To Know About Personal Insurance Cover
The simplest definition of personal insurance is, Personal insurance is a way of protecting you, your family and your assets against unforseen financial loss. When you buy an insurance policy you enter a contractual agreement with an insurance provider that guarantees you compensation for specified loss, damage, illness, or death. In return you pay a specified monthly premium.
A company which provides insurance is known either as an:
- insurance company
- insurance carrier
- or an underwriter.
The person or entity who buys an insurance policy is known as a policyholder, while a person or entity covered under the policy is called an insured. For instance, if you buy an insurance policy that covers your whole family, you are both the policyholder and the insured. Your family are the policyholders but just the insured.
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How Insurance Works
Insurance companies work by pooling together the resources of a large number of people who have similar risks and diverting them to compansate the few people who have experienced loss.
When you buy an insurance policy, you pay small monthly insurance premiums. The premiums you pay are very small compared to the compansation you get in case of the specified loss. The insurance company adds your little premium together with other policyholders’ premiums to the insurance pool.
If your insured assets are accidentally lost, stolen, damaged or destroyed, you can make a claim and get compansated from that pool of money you have been adding to. The payout is usually way bigger than your premiums.
So, the core concept of insurance is very simple to understand:
- You have important assets that you don’t want to lose.
- You can’t afford to pay for the loss of assets yourself.
- You insure the assets and pay small monthly premiums.
- You get the peace of mind of knowing that if you lose your assets, the insurance company will compansate you for your loss.
Conditions for getting compansated
You only get compansated if you claim a loss that is covered by your insurance policy. When you buy an insurance policy, read and understand the agreement, and the terms and conditions of the policy. Seek professional advice if you’re not sure what your policy will cover or exclude. Your insurer will only compansate you for the type of loss stipulated in the policy.
What Are The Different Types Of Personal Insurance?
Personal insurance is the type of insurance that covers personal risk , such as:
- auto insurance
- health insurance
- disability insurance
- homeowners insurance
- life insurance
- long-term care insurance
Ordinary people buy personal insurance policies to protect themselves from financial losses they would not be able to afford to cover on their own.
Auto insurance is an insurance contract between the owner of a vehicle and the insurer that covers financial loss in case of an automobile accident.
The policyholder pays the premiums and the insurer agrees to compansate the policyholder’s losses as defined in their policy. Auto insurance usually provides property, liability and medical coverage.
- property coverage means the policyholder get compansated for damage to or theft of the insured vehicle.
- liability coverage means the policyholder gets compansated for any legal responsibility to others for bodily injury or property damage caused by the insured vehicle.
- medical coverage means the policyholder gets compansated for the cost of treating injuries rehabilitation and funeral expenses.
Health insurance is an insurance policy that will pay specified sums for medical expenses or treatments of the insured. The amount of health care costs that will be covered by the health insurance policy are usually specified in advance. In countries like America, there is also Direct Primary Care which is a great alternative to healthcare insurance.
Disability insurance covers the insured if they become injured and disabled. It protects beneficiary’s to earn an income against the risk that disability will affect it. This policy usually covers short term disability benefits, and long-term disability benefits.
Disability insurance policy usually pays you a lump sum should you become totally and permanently disabled through illness or injury.
Home insurance policy covers for the damage or destruction of a home, usually from natural disasters such as floods and earthquakes.
Life insurance policy provides monetary benefits to the insured’s family or other beneficiary when the insured passes on. This policy may also cover the insured’s funeral and other final expenses.
Life insurance policies usually allow the option of the proceeds being paid to the beneficiary in a lump sum. As a life insurance policy holder, you get the peace of mind of knowing that your dependants will not be financially disadvantaged in case of your passing on.
Long-Term Care Insurance
Long-term care policy provides covers the costs of the insured’s care past a predetermined period. It generally covers the care not covered by health insurance, and medical aid. Individuals who are compansated by long-term care policy are generally not sick, but are unable to perform the basic activities due to advanced age.
Trauma (crisis) insurance
Trauma insurance policy pays you a lump sum payment to help you recover from a traumatic situation such as a heart attack, cancer or stroke.