Introduction to Insurance
What is insurance?
Insurance is built around the idea that businesses and individuals want to protect themselves against unwanted events that could occur in the future.
In other words, insurance is a way of managing potential risks. Over the years, insurance companies have developed models to manage predictable risks and ultimately share the costs among individuals with the same needs.
Insurance came into existence with the rise of trade economies and strongly contributed to the development of modern societies. It helped facilitate free enterprise and individual progress, it also gave people peace-of-mind to make choices and plan for a secure future.
The insurance industry was created on the following key principles:
- the need to ensure future economic stability and security
- the principle of solidarity between similar groups exposed to the same risk scenario
- the fiduciary relationship between the insured and the insurer, based on transparency
- the reversal of the economic transaction – the service is paid for in advance (the insurance premium) and then, if the accident in question happens, the insurer is required to compensate the damage covered in the agreement.
What are the common types of insurance?
Insurance acts as a safety net. Individuals and businesses buy insurance products to cover themselves financially against anything that could happen to their people, assets or property.
Insurance can cover an individual across and during the different stages in life and should be considered based on their needs at that point in time. Examples include:
- Parents protecting their family against illness
- Landlords protecting their property against damage or fire
- Travelers protecting their travel plans against delays or bad weather conditions
- Car owners protecting their vehicles in the event of an accident
The common types of insurance are:
- Life: Life insurance products will help protect individuals if an event occurs involving human life (critical illness, disability, death). The customer will receive a one-off compensation or a fixed sum of money annually (annuity) based on the agreed contact - in exchange of advance payments (premiums) made to the insurer.
- General Insurance: The General Insurance category covers everything that is not life insurance - sometimes called non-life insurance. It covers individuals against:
- Provides health coverage
- Protects an individual’s home
- Ensures liability for damage to third parties or to their property
- Protects an individual’s car (motor insurance)
- Ensures an individual’s travel plans are not affected