We describe insurance as a contract between an insurance company and the policyholder (yourself). Insurance protects yourself, business and property against loss or risks such as burglary, car loss or house fire. You can also find an insurance policy that will pay you money should you die, get too sick and not able to work or provide financially for your family.
How insurance works
With every insurance policy, you will decide what you want to be insured against. Your insurance company will calculate your monthly premium, and also tell you what you will be protected against. Not all insurances are comprehensive; some only cover a small portion.
Three main steps of insurance:
- Choosing a policy: First step is contacting an insurer and choose a policy. Your policy document will list all the things that you are covered from or not protected against. For example, your car insurance policy might say that it will insure you should anything bad happens to your car, but if your mag-wheels get stolen, they will not insure them as these fall under car modification.
- Paying the premium: This is monthly money that you will have to pay towards your insurance policy. The money you pay depends on the value of the things you are insuring, as well as the risks of losing them. For example, if you are a first time driver and have no driving experience, your monthly premiums will be slightly higher because you are more likely to be involved in an accident.
- Making a claim: You can claim on your insurance company should anything happen that is insured by your insurance policy. Here you basically tell your insurer what really happened. They will check what is covered on your policy. If your claim meets all the requirements and what you are covered against, they will insure you as agreed on your insurance policy document.
Insurance is available to provide financial protection against the below losses:
- Car loss, theft or hijacking
- House burglaries
- Apartment fires
- Long-term disability
- Medical cover to injured passengers in a car accident
- And many more
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