This is our topic for today as we dive into the world of insurance basics, and how does it work? Bring a cup of tea or juice, and let’s start learning.
What is life insurance?
Personal insurance is any type of non-commercial policy. You bought it to protect yourself from financial loss that you cannot afford. It refers to the risk you may face due to accident, illness, death or property damage.
How does insurance work?
When you buy insurance, you pay the company. These payments are called “premiums.” In return, you are protected from certain risks. The company promises to pay you the loss in the event of loss. The idea of ​​insurance is that spreading the risk of loss, such as fire or theft, among many people reduces the risk for everyone.
Insurance companies have many customers. You pay all premiums. Not every customer suffers losses at the same time. If damage occurs, they can get insurance money to cover the damage.
Not everyone has to buy it, but it’s a good idea to buy insurance if you have a lot of financial risk or investment risk. However, when a third party has a financial interest in the property, as is the case with a bank holding a mortgage, obtaining insurance is often a condition of loan approval.
Why do banks require you to insure?
Some insurances are not required by law. Lenders, banks, and mortgage lenders ask for this information if you borrow money from lenders, banks, and mortgage lenders for large purchases (such as a car). B. A house or car.
In order to take out a loan to buy a car or house, you need to insure it. If you have a car loan, you need auto insurance; if you have a home loan, you need home insurance. Eligibility for a loan for a large purchase such as a home is usually required. If you incur a loss before you pay it off, lenders want to make sure you can take the risk that could devalue your car or home.
5 basic types of life insurance
When most people think of personal insurance, they probably think of one of the following five main types:
Residential such as B. Home, condo or co-op or renters insurance.
.Car insurance and insurance for other vehicles such as motorcycles.
. Boat insurance that may be covered by home insurance and independent boat insurance for boats of a specified speed or length not covered by home insurance.
.Health insurance and life and disability insurance.
. Liability insurance that may fall into these categories. It protects you from being sued if someone else suffers damage through your fault.
Although you may get some policy from the company, this is not a guarantee. Insurance is subject to approval and is divided into groups. This means that before anyone can legally sell or advise, they must be licensed by the state to sell and advise you on the type of purchase.
For example, your home insurance broker or agent may tell you that they do not offer life or disability coverage. They may be able to refer you to an agent in their area who is licensed to sell you the policy.
Although you may get some policy from the company, this is not a guarantee.
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