When considering an insurance company one needs to decide what kind of policy it is he wants to purchase. A life insurance company will insure a person’s life, either through paying a lump sum amount or monthly premiums. A company, which can be either nonprofit, for profit or governmental owned, which sells the promise to cover for particular expenses in return for a fixed premium, also called a premium. For instance, if you buy health insurance from the insurance company then it will cover (at least partially) the client’s regular medical bills, should any.
Many insurance companies sell a form of “indemnity”, which means that they will cover a claim but only for a fraction of the usual premium charged. An example of this would be the “Shared Risk” option offered by many companies. The Shared Risk feature provides for a company to insure many clients at the same time and on a “Shared Risk” basis. The company has no risk and so does not charge as high a premium as it would for a policy that covered a small number of clients.
The most common forms of Indemnity are life insurance and auto insurance. Life insurance generally takes the form of a “Whole of Life” plan. This type of plan pays the whole of a client’s death benefits, regardless of whether the client lives to an old age or remains sickly until the end of the insurance company’s lifespan. However, it must be ensured that a person pays the full premium amount, irrespective of his current health. The benefit of this policy is that the premiums are paid on a “runs in block” basis, in other words the premium amount for each policy stays constant for as long as there is not a claim. The policy thus does not become expensive over the years.
Auto insurance policies are the simplest form of Indemnity Insurance. These cover all risks on a client’s vehicle such as theft, accidents, damage due to fire, weather conditions, etc. Unlike life insurance policies, auto insurance policies do not have a “runs in block” principle and thus do not charge any extra premium amounts for claims that occur later. Also, it is possible to raise the deductible amount to a higher level which will reduce the monthly premium amounts payable by the policyholders.
However, all Insurance policies are not the same. Different types of Insurance policies have different payment terms and conditions. One type of Insurance policy can payout a client’s financial loss when he or she meets with an accident, while another type of insurance policy may not. So, it is very important to understand the various Insurance policies before settling for one.
In addition, one must consider the type of risks that they are most exposed to and buy insurance policies accordingly. Many Insurance companies have developed specialized Insurance plans for their clients. For instance, some Insurance companies offer Property Insurance, while others provide Health Insurance. It is advisable to buy the insurance policy that covers the most common risks.