Here are 10 essential facts about insurance:

1.Risk Management Tool

Insurance is primarily a tool to manage risk. By paying a premium, individuals and businesses transfer the financial burden of potential losses to an insurer.

2.Types of Insurance

There are many types, including life, health, auto, home, liability, and business insurance, each tailored to protect against different kinds of risks.

3.Premiums Depend on Risk

The amount paid for insurance, called the premium, is based on the risk level of the individual or asset being insured. Higher risks often mean higher premiums.

4.Deductibles Affect Costs

A deductible is the amount policyholders pay out of pocket before the insurance company covers a claim. Higher deductibles generally lower premiums but require more out-of-pocket expenses when filing a claim.

5.Underwriting Process

Insurance companies evaluate applications through an underwriting process, assessing risk factors like age, health, driving record, or property value to set appropriate coverage terms.

6.Liability Coverage

Many insurance types (like auto and home) include liability coverage, which protects policyholders if they’re legally responsible for causing injury or property damage to others.

7. Policy Exclusions

Not all risks are covered by a policy. Exclusions outline specific situations or damages that are not covered, so it's essential to read the fine print.

8. Life Insurance Options

Life insurance is typically divided into term life (coverage for a set period) and whole or universal life (permanent coverage with an investment component).

9.Health Insurance Essentials

Health insurance covers medical expenses, and policies may vary significantly in what they cover, including preventive care, hospitalization, and prescription drugs. Plans can also differ in network restrictions.

10.Claims Process

To receive a payout, policyholders must file a claim, providing details about the incident. The insurer then assesses the claim and, if approved, provides compensation according to the policy terms.

Insurance helps provide financial security, covering unexpected events, and can be essential for personal and business financial planning.