What is insurance?

What is insurance?

Insurance a product... or a service?

It's both actually and it's more aptly described as a promise. Quite simply, it's a promise to pay you or your beneficiaries in the event of a loss. You purchase insurance because life has risks.

You might crash your car... a tornado or a fire could cause you to lose your home. Any of these hazards could also take your life as well-- or you could be seriously injured. There is protection available for all of these risks and more in the form of a document or a collection of documents called an insurance policy. An auto insurance policy, for example, will lay out specific risks for which an insurance company will reimburse an insured person for a loss. It will also provide details about what risks are specifically excluded. You agree to make regular payment to the insurance company called "premium". In exchange, the insurance company provides a promise (in writing-- the "policy"), to reimburse you for whatever loss you have experienced.

Insurance is a necessity in a world of uncertainty. There are countless ways to protect yourself against adverse risk and they all involve the basic elements of a standard contract-- offer, acceptance, and consideration. For example, an insurance company will evaluate you as a risk, make an offer to insure you based on your individual underwriting characteristics, you signal your acceptance of their offer and a policy is issued, you pay the company a comparatively small amount of money (consideration) so that they assume the risk of a potentially much larger financial loss. It would be impossible for most Americans to absorb the sudden, accidental loss of their primary residence after it's destroyed by fire for instance. Homeowners insurance, for most average suburbanites costs in the neighborhood of $500-$1,000 per year. The average home in the United States costs $220,500. If you get homeowners insurance in place and your home burns down the next day-- the insurance company will cut you-- and your mortgage company-- a check for the reconstruction costs. It's a bargain that few are reluctant to pay for obvious reasons.

The main types of insurance the average American consumer will need are: Health Insurance, Auto Insurance, Homeowners Insurance, and Life Insurance.

* Health Insurance reimburses the medical facility that treats you or you personally if you're out of pocket for medical expenses. Health insurance costs are high but costs of treatment are much higher. If you're admitted to a hospital for something, even if it turns out to be minor, could cost tens of thousands of dollars. Whine all you want about the cost of health insurance-- but you'll be setting yourself up for a complete breakdown if you don't have it.

* Life insurance , on the other hand, is cheap-- especially if you're young and healthy. For literally pennies a day, consumers of life insurance can secure a promise from an insurer to pay their beneficiaries if they pass away. A 40 year old male can purchase hundreds of thousands of dollars worth of coverage for less than $30 per month under certain circumstances.

* Car insurance can vary widely by state, but it is generally quite affordable. For a small amount of premium, the insurer will reimburse you for the market value of your car, or most importantly, pay the potentially huge costs associated with damages that may result from your negligence behind the wheel.

* Homeowners insurance is similar... it will take care of the cost to rebuild your home, but it will also pay a claimant who is injured on your property if you negligently forgot to shovel the snow from your sidewalk.

How can a new driver get cheap car insurance?

How can a new driver get cheap car insurance?

Car insurance for first time drivers can be extremely expensive. This is due to the fact that the company sees first time drivers – whether teenagers or adults – as a high risk, due to their inexperience. Teenagers who are just getting their licenses are seen as the highest risk of all, as statistically they are much more likely to have an accident than any other group of drivers. However, there are some ways that new drivers can lower their rates somewhat.



Auto insurance is required in the United States and many other countries. It provides financial protection for new drivers, which may decrease their worry about driving. It is important for a new driver to have insurance that at least covers the minimum amount for property damage and injuries. However, first time drivers can make use of many different criteria to lower their insurance rates. Some of these are advertised by auto insurance companies while others are harder to find.

First of all, insurance will always be less on a car with extra safety features. Airbags, anti-lock brakes, and automatic seatbelts are all examples of safety features that can lower your insurance rates. Features that deter theft, such as LoJack and car alarms will also cut down on your insurance premiums. Make sure you tell your insurance agent about any of these features that are present on your car.

Your car also makes a difference in your insurance premiums. Well-built cars with a good safety record are cheaper to insure than any other type of car. Sports cars and high-end cars can be very expensive. If you are looking for cheap insurance, stick to functional, safe cars that aren’t flashy.

Other factors to look for in car insurance for new drivers includegroup discounts, good student discounts, and good driver discounts. Group discounts may be available for certain professions, such as educators, depending on your insurance company. Students who maintain at least a B average can often qualify for good student discounts. Finally, your driving record is a large factor in determining your insurance rates. If you are a new driver, your record

What is Life Insurance?

What is Life Insurance?

Life insurance is a form of insurance that pays monetary proceeds upon the death of the insured covered in the policy. Essentially, a lifeinsurance policy is a contract between the named insured and theinsurance company wherein the insurance company agrees to pay an agreed upon sum of money to the insured's named beneficiary so long as the insured's premiums are current.

People take out life insurance policies for a number of reasons. Suchinsurance provides security to family members upon the loss of a loved one. For instance, if the primary wage earner dies in his or her prime, the death benefit received from a life insurance policy will assist the surviving family members in overcoming the burden of the tragic loss. Life insurance can be purchased by individuals, but is also offered as a perk by many employers. Often times, large employers and government employers offer group life insurance at no cost to the employee. Should the employee wish to obtain additional lifeinsurance from the employer's insurance company, they can usually do so at reduced rates.

The cost of life insurance varies depending on such factors as the insured's age, health, and occupation. For example, the premium for a 25-year-old, male, non-smoker in excellent health will be far less expensive than a similar policy for a 65-year-old male smoker. Similarly, a sky dive instructor would have to pay much higher premiums for life insurance than would a librarian.

Life insurance is available in a number of different forms to fit the tastes of the proposed insured. Some of the typical forms of lifeinsurance policies include: whole life, variable life, and term life.Term life insurance policies begin with low premiums during the initial stages of the policy and these premiums increase steadily as the insured grows older. There is no cash build-up in a term policy and, accordingly, the death benefit will not increase.

With whole life and variable life insurance, a portion of each premium pays for the insurance and the remainder serves as a tax-free investment. A whole life policy sets a premium at the beginning of the policy and that premium does not change over the life of the policy. This form of insurance allows for a cash build-up during the insured'slife. This cash build-up can be used during the course of the policy or it will simply serve to increase the death benefit in the end.

In a variable life product, the premium remains the same over the lifeof the policy, and there should be a cash build-up as long as the various mutual funds selected by the insured perform well.