What Is Insurance?
What exactly is insurance?
It sounds like a very basic concept, but it is important to know what insurance is, in order to work out why insurance is so essential to modern-day activities, and why there i such a wide range of different insurance type products out there in the marketplace.
So, typing 'define:insurance' into Google results in this definition coming up: "A practice or arrangement by which a company or government agency provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium".
Interestingly, the word that isn't mentioned here is the key word in the whole process as to why people take out insurance - and that word is RISK. Insurance is a way of risk management, with financial compensation for the possibility of an uncertain loss based on the risk that is taken.
So, when you buy a house, you fill it with contents, which are of course worth money. There is a risk that you are going to get broken into and that the contents of the house, or some of it, will be stolen. This will cost you money. You don't really know exactly what that risk is or how likely it is to happen, but you know that there is a CHANCE that it will happen, or a PROBABILITY: this provides RISK.
In order to mitigate your exposure to that risk, you can take out contents insurance. Depending on the country you live in, this might be mandatory or optional (buildings insurance - that on the bricks and mortar - is usually mandatory).
Then a complicated trade-off comes into effect: you pay a certain amount on a regular basis to be insured - by an INSURER - which, if the worst happens, will pay out a certain sum of money to you, depending on various complicated factors. This is the key idea of insurance.
So it can be seen why insurance is so important, as without it you are completely exposed to whatever risk it is you haven't mitigated against. Of course, insurance is interesting as in you never actually want to have to make a claim, but it is something that most people calculate they can't afford to be without in some cases, whilst in others they decide they are comfortable with the risk.
The articles on this website look at a range of different insurance products, and other pieces of relevant information, with the overall goal of explaining what insurance is and what types of risk can be insured against.
One of the most well-known types of insurance product is life insurance. And this does very much what it says on the tin - it insures against the life of a person.
Thus, if the policy holder (the...
Agricultural insurance is a niche type of insurance product that is available for those who work in specific areas of agriculture. This type of product could offer piece of mind against various...
Vehicle insurance is the category of insurance products that cover, surprisingly enough, vehicles.
These can be any sort of vehicle that you can think of, with of course the most common product...
One of the most common forms of insurance product is travel insurance.
Wherever there is travel involved, there is invariably risk, and infact a range of risks, and therefore an insurance product...
Flood insurance is a specific product under the umbrella of insurance and it covers - as the name suggests - losses that occur due to flooding. In many cases, this form of protection (flood...
Contents insurance is a type of insurance product that covers the items that you have - the contents - of your home.
There are a range of different providers of contents insurance out there on...
Motorbike insurance might sound like a bit of a niche category of insurance, but there are actually a huge number of people who ride these sorts of vehicles, and so even within this there are...
There are two main types of crop yield insurance available, which come under the category of types of agricultural insurance product.
It is self-explanatory what crop insurance guards against -...
People love their pets - whether you are a cat lover or a dog lover, or prefer something like a rabbit, a guineapig, snakes, hamsters or indeed any animal that you can think of, then pet insurance...
Saving on Home Insurance
Home insurance splits into the bricks and mortar insurance - buildings insurance - and the stuff that you put inside your house such as your valuables - the contents, hence that bit is called the...