subject: What Is Insurnace [print this page] Insurance is basically the protection against a financial loss. Insurance is basically risk management, or in other words insurance means you're covering your bases for a possible loss. There are several different types of insurance policies and insurance coverage to choose from. Likewise there are several different types of insurance companies to choose from. A lot of insurance companies will either specialize in a certain kind of insurance coverage and/or there are insurance companies who provide various types of insurance coverage.
There is a certain lingo or vocabulary that comes along with insurance coverage and insurance policies. It's important to understand this lingo or insurance vocabulary if you are going to understand your insurance coverage, your insurance policy, and your insurance benefits. Depending upon the type of insurance policy will also depend upon the type of vocabulary used in the insurance policy as well. For example, with life insurance there is the policy holder and the beneficiaries. Whereas with car insurance there is the policy holder and the drivers. There is liability insurance which is usually rolled into different insurance policy coverages. Liability insurance means that you're protecting others and other people's property in the case that you damage it--an example of this type of liability insurance would be found in car insurance coverage. Liability insurance also shows up in home insurance, protecting those who may get hurt on the home owners property. Liability insurance also shows up a lot in business insurance. For example public liability insurance and professional liability insurance are two examples.
Health insurance is usually provided by insurance companies that only provide several types of health insurance coverage. Also, there is private health insurance provided by privately owned and operated companies and then there is health insurance coverage provided by government-funded companies such as Medicare. The privately owned insurance companies pay your insurance benefits from the insurance premiums.
Government funded insurance companies pay benefits from income taxes. Insurance companies also usually use insurance premium payments to invest in stocks, bonds, and mortgages. When insurance companies use premiums to invest in these types of investments, the idea is to make more money for the insurance companies as well as grow the insurance companies money so that the insurance companies are able to pay benefit payments.
Insurance is basically a risk for the insurance companies as well as a risk to the insurance policy holders. A policy holder is taking the risk of opening an insurance coverage policy and paying the premium quote agreed upon to provide financial coverage to the policy holder in the event of larger financial losses such as a health problem, a sour business deal, a car accident, etc. The insurance companies are taking the risk of promising to pay out a certain amount of benefits in the event of an accident or damage or whatever losses that the policy holder has that are included in the insurance policy. The risk that the insurance companies are taking is the policy holders will not all need their benefits paid at the same time and not all the policy holders will need or use their benefits. So, insurance is a game of risk management for both the policy holders and the insurance companies.
