MRI - Types of Insurance Lesson

Types of Insurance

So exactly what can you insure? Insurance policies come in two basic types: property and casualty insurance and life, health, and disability insurance. Property and casualty insurance policies cover fire and burglary, as well as liability. Liability is a legal responsibility to pay. These policies cover both real property and personal property. Real property refers to permanent structures and other objects such as buildings, fences, and built-in appliances. Personal property refers to anything not permanently attached, such as cars, RVs, furniture, clothing, and personal items. Automobile insurance, renter's insurance, and homeowner's insurance are all types of property and casualty policies.

Life, health, and disability insurance policies include life policies, health, and medical insurance policies, long-term care policies, and social insurance policies such as worker's compensation and unemployment insurance. Unemployment insurance refers to providing temporary payments to workers who have lost their jobs under certain circumstances. Workers' compensation refers to paying benefits to employees hurt on the job. Life insurance provides funds to your dependents in case of your death. Health and medical insurance pay a portion of your medical expenses to doctors and hospitals. Elderly people can take advantage of long-term care insurance to pay for home health care. Employers generally provide employees with worker's compensation and unemployment insurance. Home health care refers to care given in the home including skilled nursing care and assistance with daily care.

Insurability

Not every person is eligible to obtain all types of insurance. Because it is difficult to predict the future, insurance companies strive to determine who is insurable. Insurance companies hire actuaries and underwriters who use the laws of probability to determine the likelihood of an individual filing a valid claim.

Insurance companies want to keep premiums as low as possible for their customers and to do that, they need to keep their costs as low as possible. As individuals make applications for a policy, the policy is reviewed and the insurance company looks at personal characteristics such as age, gender, and family history for life and medical insurance. The insurance company looks at the type of car, miles driven a week, and driving record for automobile insurance. Individuals may also be asked to produce evidence of insurability, especially in the case of medical insurance. Questions on the application should be answered in good faith as misrepresentation could cause the individual to become uninsurable.

Before You Buy Insurance

Before you buy any insurance, you should ask yourself the following questions:

Choosing an Insurance Company

When planning to purchase an insurance policy, it pays to shop around. Premiums may vary widely from company to company. When comparing policies, be sure that you are comparing similar policies, that is, make sure things like coverage and deductibles are the same. While you should always seek discounts and look for other ways to lower your premium, choosing insurance based on the price alone is not wise.

The financial health of the insurance company and the quality of the company's customer service should be the two deciding factors in choosing an insurance company. Both of these items can be easily determined. A. M. Best Company Links to an external site. has rated insurance companies since 1905. Ratings include A+, A, B+, B, C+, and C. Choose only companies with an A+ rating. A company without good financial health might not be able to pay its claims in the face of large losses such as those following a natural disaster.

While financial health is important, it is not an indicator of how fast claims are paid or how well their representatives treat a customer. While there is no universal rating for customer service, checking out a company's complaint ratio can give you an idea of how well a company treats customers. The complaint ratio can be obtained from your state's insurance commissioner or the National Association of Commissioners website. A low complaint ratio would indicate a satisfactory customer service experience.

Self-Assessment

 IMAGES CREATED BY GAVS