What is the Need for Insurance and Types of Insurance?
The purpose of insurance is to compensate or indemnify the affected person for his financial loss. Insurance neither removes the loss nor does it undertake to stop the misfortune or disaster from happening. All it does is to help minimize the “blow” from a purely economic viewpoint.
The fact that the master of a house taking out life insurance does not mean that he would not die but the proceeds of the life policy, which is payable to the dependents will help lighten their economic and social problems.
Insurance has been discussed in many areas as the handmaid of commerce. It could have been difficult for commerce and industries to operate with organized insurance schemes.
Insurance is a business that exists to ensure the existence and survival of other businesses because it makes it possible for businessmen and women to take risks and make investments in every aspect of the rich. They provide employment opportunities to some citizens.
Types of Insurance
Insurance businesses are divided into different forms among them includes the following.
The main purpose of life insurance is to provide against the loss of future income which may arise as a result of the premature death of the income earner. The life assurance industry is divided into many groups, for example, ordinary life assurance and industrial life assurance.
The major difference between the two is that the premium for industrial life assurance is payable at more frequent intervals, weekly, monthly as the case may be.
Industrial life assurance is rare in some countries and our attention will be centered on ordinary life assurance which includes term life assurance, whole life assurance, and endowment assurance.
Term Life Assurance:
Term life assurance is assurance designed for a specific period in which the insurer in return for premium undertakes to pay the sum assured in the event of the life assured dying within the period or term specified in the policy.
The Whole Life Assurance:
This is the purest form of life assurance. Whole life policies are issued by all life insurance companies in the world, It is the most suited to the family man who wants to provide for his dependents in the event of his premature death. Premium may be paid as specified in the contract agreement called the life assurance policies.
An endowment life assurance contract provides that the assurers will pay the sum assured when the life assured reached a certain age or when she dies, whichever comes first. Also, the endowment policy is regarded as the best policy because the life assured usually gets the policy money if he survives until the maturity date.
This is the type of insurance designed to indemnify the insured for loss of or damage to buildings and personal property by fire, lightning, windstorm, explosion, and a vast array of other perils.
Coverage may be provided for both the direct loss [ that is the actual loss represented by the destruction of the material good] and indirect loss [defined as the loss of income and or extra expense caused by the loss of use of the protection.
Marine insurance is designed to protect against financial loss resulting from damage to or destruction of owned property. The peril protected against are primarily those connected with transportation. They are divided into ocean marine and inland marine.
Accident insurance may also be called casualty insurance and is a mishap that is neither looked for nor designed by the insured. It may be defined as an unlooked-for mishap or an outward event that is not expected or designed.
the event may be designed or intended by someone else but provided it was accidental or unexpected by the victim, here it is an accident from the point of view of the victim. Accident insurance may be classified into groups.
a. insurance of property against accidental loss or damage e.g Burglary
b. Insurance of person against accident injury, death, or sickness. E.g personal accident insurance.
c. Insurance of a person’s legal liability arising from accident e.g public liability insurance.
All Risk Insurance:
This is the most popular form of insurance cover available for valuables such as gold, jewelry, watches, and cameras. It virtually covers accidental loss or damage of any kind including loss or damage due to fire, theft, or even if the article in supply is lost or damaged. In all policies, each item insured is specified and the value state.
This is the larges policy in existence, it does not mean that the premium out of it is the most profitable. the reason being that the claims and management expenses drain up the vast premium. The risk a motor vehicle insurance cover includes risk of damage or destruction of the motor vehicle itself, the risk of being called upon to pay damage to a third party.
Classes of motor insurance:
1. Private car
3. Motor cycle
4. Agriculture and forestry vehicles.
Burglary insurance policies provide insurance cover against loss of or damage to the property insured by burglary or house breakage.
We have actually pointed out That the purpose of insurance is to compensate or indemnify the affected person for his financial loss. Insurance neither removes the loss nor does it undertake to stop the misfortune or disaster from happening. All it does is to help minimize the “blow” from a purely economic viewpoint.
We also listed life assurance, fire assurance, motor vehicle, accident, whole life, endowments, etc as the types of insurance we have.