When talking about insurance, we refer to an instrument that offers protection from financial loss of one or more types. It is primarily a risk management practice against potential risk of contingent, tentative losses. In simple words, insurance is an agreement between two parties- an insurer and an insured where the insurer provides a compensation in form of a payment to the insured in the event of occurrence of a covered loss.
Insurance is a way of managing risks. When you buy insurance, you transfer the cost of potential loss to the insurance company in exchange for a free known as the premium. Insurance company invests the funds securely so it can grow and then they payout when there is a claim. So many things can be insured, the home (because mortgage lenders need to know your home is protected). It can be used to cover health care costs like drugs, dental care, vision care and all other health related items.
Life insurance can also be done to provide for the family in the event of a death. It can also be done to run a small business or family farm by managing the risks of ownership. More importantly, insurance can be done on valuables in case of theft or damage especially valuables like jewelry or precious stones.
While buying an insurance policy, it is prudent to understand how it works. Understanding the basics, key terms that we can come across in insurance policy purchase. Two of such key terms are – Premium and Deductible. Premium of a policy simply refers to its price which is payable either in full or in installments to keep the policy in force. Take note that the insurance company decides the premium and take into consideration your risk profile before determining your premium. Take for example, if you own a car with an anti-theft alarm and high security system installed in it, then the insurance premium of the car will go down.
Deductible is the second most important component of an insurance policy as it comes into play whenever you make a claim. When you file a claim, you have to pay a certain amount from your own pocket which is called out of pocket expense before the insurance company releases a payout for your losses. Based on insurance policy types or the insurance company, deductibles can be put on pre claim or per policy basis. Insurance policies with high deductibles are relatively cheap as policyholders are less likely to raise small claims because of high out of pocket expenses.
Talking about the insured, they receive a contract called the insurance policy, which details the conditions and circumstances under which the insurer will compensate the insured. If the insured experiences a loss which is potentially covered by the insurance policy, the insured submits a claim to the insurer for processing by acclaims adjuster. The insurer may hedge its own risk by taking out reinsurance, whereby another insurance company agrees to carry some of the risk, especially if the risk is too large for the primary issuer to carry.
For more information please visit http://www.jewelleryinsurance.com.sg
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