Concept and History
Since the civilization started man has always been searching for a good type of safety and security protection. In his life he has taken a risk and to overcome this risk developed some kind of security by making an organization. In this way man has learned about insurance and the concept of insurance was originated.
We can define insurance as a legal policy which binds a contract between an insured person and the insurance company. Insured person is the one who joins or buys the policy and he is also called policy holder.
Consider a person who has joined an insurance company and is now policy holder. Then he gives money to the company in the specific time. The company has done an agreement with him that he will be paid a fixed amount of money even if he has paid only one installment to the company or he has paid all the installments in case of financial losses or if he dies. Now consider that if he faces a disease or meets an accident then the company will provide all the expenses for his treatment and if he dies then company gives that fixed amount of money to his family. There is another case also if he becomes disabled and is unable to work then he will be offered income regularly from the company as it is agreement of the company. This concept is called the insurance.
The main goal of an insurance policy is to provide security and protect the policy holder from financial losses of life. It can be done by sharing the losses of a few people among many so these losses can be easily handled. The term insurance is very useful for both the company and policy because it provides the security and financial stability to both the policy holder and also the company. That’s why it is called the contract binding between insured and company. It is a kind of fund that is provided to the insured by the company when he suffers from some financial losses.
In most of the companies several Insurance companies were introduced a very long time ago. This means it is very popular among people and it became popular in all the countries of the world. Today every country has several large companies that are working on insurance.
Basic insurance terms
There are several terms used in insurance. We will discuss these terms here to understand about insurance deeply. These are given below:
This is an application form that a policy holder fills and provides all his basic information in this form and also tells the category in which he is applying i.e, the type of insurance.
The termination of an insurance policy during its period is called cancellation. It is further divided into three types which are given below:
- Flat cancellation
- Pro-rate cancellation
- Short-rate cancellation
When an insurance company does not accept the request of an applicant in a specific situation then this term is called decline.
The date at which an insurance policy begins is called effective date.
The date at which an insurance policy ends is called expiration date.
The specific person who is acting on the behalf of insurer and also authorized by the company and his work is to transact all categories of insurance that the company is licensed to sell.
We will study about this in detail later.
Types of insurance:
As we know that there are several kinds of financial losses so to overcome these kinds of financial losses there are also several kinds and types of insurance. We will only introduce them to you now but we will study them in detail later. These are given below:
The Company provides money and security to the insurer’s beneficiary in case the insurer dies. This type is called life insurance.
The company provides medical expenses and all the hospitalization bills of the policy holder when he is admitted to hospital.
Long-Term care insurance:
This type of insurance gives all the policy holder’s expenses that are related to nursing and medical for the elderly.
It is very useful type of insurance. The Company provides regular income to the insurer if he becomes disabled and is unable to work by some accident etc.
Personal property insurance:
This type of insurance refers to the providing of security from company to the insurer and if he gets a loss by his property then company helps to overcome his loss.
Home owner insurance:
This type of insurance covers the loss of the home of insurer if his house is damaged by the accident and natural disasters.
This type if insurance is also important because it provides security to the insurer’s car and the passengers and if the car damages then the company helps to overcome the loss.
Some other types:
Insurance is very vast field and it has also several other types. These are related to business, disaster and Travel etc.