Insurance

What does it mean to insurance?

Insurance is a form of financial loss protection in which a party agrees to compensate another party in the event of a specific loss, damage, or injury in exchange for a fee. It is a type of risk management that is primarily used to protect against the risk of a contingent or uncertain loss. An insurer, insurance company, insurance carrier, or underwriter is a company that sells insurance. A policyholder is a person or entity who purchases insurance, while an insured is a person or entity who is covered by the policy. 

The insured receives a contract, known as an insurance policy, outlining the terms and conditions under which the insurer will compensate the insured, or their designated beneficiary or assignee. The premium is the amount of money charged by the insurer to the policyholder for the coverage specified in the insurance policy. If the insured suffers a loss that may be covered by the insurance policy, the insured files a claim with the insurer for processing by a claims adjuster. A deductible is a mandatory out-of-pocket expense required by an insurance policy before an insurer will pay a claim (or if required by a health insurance policy, a copayment).

History of Insurance

Babylonian, Chinese, and Indian traders used risk transfer and distribution methods as early as the third and second millennia BC, respectively. [1][2] Chinese merchants traveling through treacherous river rapids would redistribute their wares across multiple vessels to limit the loss caused by a single vessel capsizing.

According to Codex Hammurabi Law 238 (circa 1755-1750 BC), a sea captain, ship manager, or ship charterer who saves a ship from total loss is only required to pay one-half the ship's value to the ship owner. A legal opinion written by the Roman jurist Paulus in 235 AD was included in the Digesta seu Pandectae (533), the second volume of Justinian I's (527-565) codification of laws ("Rhodian law").

It articulates the general average principle of marine insurance, which was established on the island of Rhodes between 1000 and 800 BC, most likely by the Phoenicians during the proposed Dorian invasion and the emergence of the purported Sea Peoples during the Greek Dark Ages (c. 1100–c. 750).

The fundamental principle that underpins all insurance is the law of general averages. An archeological dig in Minya, Egypt, in 1816, unearthed a Nerva-Antonine dynasty-era tablet from the ruins of the Temple of Antinous in Antinoöpolis, Aegyptus. The tablet outlined the rules and dues of a burial society collegium founded in Lanuvium, Italy, around 133 AD, during the reign of Hadrian (117-138) of the Roman Empire. 

Future United States Supreme Court Associate Justice Joseph P. Bradley (1870-1892 AD), who worked as an actuary for the Mutual Benefit Life Insurance Company at the time, submitted an article to the Journal of the Institute of Actuaries in 1851 AD. His article provided a historical account of a Severan dynasty-era life table compiled by the Roman jurist Ulpian around 220 AD and published in the Digesta.

Insurance concepts can also be found in Hindu scriptures from the third century BC, such as Dharmasastra, Arthashastra, and Manusmriti. [10] The ancient Greeks had marine loans. Money was advanced on a ship or cargo, to be repaid with high interest if the voyage was successful. However, if the ship is lost, the money will not be repaid, so the interest rate must be high enough to cover not only the use of the capital but also the risk of losing it (fully described by Demosthenes). Since then, loans of this nature have been common in maritime lands under the names bottomry and respondentia bonds.

Around 1300 AD, direct sea-risk insurance for a premium paid independently of loans began in Belgium. Separate insurance contracts (insurance policies not bundled with loans or other types of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates. The first known insurance contract dates from 1347 in Genoa. Maritime insurance expanded rapidly over the next century, and premiums varied according to risk. These new insurance contracts enabled insurance to be separated from investment, a separation of roles that was first useful in marine insurance.

On June 18, 1583, the Royal Exchange in London issued the first known policy of life insurance for £383, 6s. 8d. for twelve months.

The social consequences of Insurance 

Insurance can have a variety of social effects because it changes who bears the cost of losses and damage. On the one hand, it may increase fraud; on the other hand, it may assist societies and individuals in preparing for disasters and mitigating the effects of disasters on both households and societies.

Through moral hazard, insurance fraud, and preventive measures taken by the insurance company, insurance can influence the likelihood of losses. Insurance scholars have traditionally used the terms moral hazard and insurance fraud to refer to increased risk due to intentional carelessness or indifference. 

Insurers try to combat carelessness through inspections, policy provisions requiring specific types of maintenance, and possible discounts for loss mitigation efforts. While insurers could theoretically encourage investment in loss reduction, some commentators have argued that in practice, insurers have historically not pursued loss control measures aggressively, particularly to prevent disaster losses such as hurricanes, due to concerns about rate cuts and legal battles.

Methods of Insurance

The Chartered Insurance Institute's study books list the following insurance methods:

• Co-insurance refers to the sharing of risks by insurers (sometimes referred to as "Retention")
• Dual insurance refers to having two or more policies that cover the same risk (the individual policies would not pay separately - under a concept known as a contribution, they would contribute together to make up the policyholder's losses). However, dual payment is permitted in the case of contingency insurances such as life insurance.)
• Self-insurance refers to situations in which risk is not transferred to insurance companies and is instead retained solely by the entities or individuals themselves.
• Reinsurance refers to situations in which an insurer transfers some or all of its risks to another insurer known as the reinsure.

What are the mean types of insurance?

Any quantifiable risk can potentially be insured. Perils are specific types of risk that can result in claims. An insurance policy will specify which perils are and are not covered by the policy. The following are non-exhaustive lists of the various types of insurance available. A single policy may cover risks in one or more of the following categories. Vehicle insurance, for example, would typically cover both the property risk (theft or damage to the vehicle) and the liability risk (legal claims arising from an accident).

In the United States, a home insurance policy typically includes coverage for damage to the home and the owner's belongings, certain legal claims against the owner, and even a small amount of coverage for medical expenses incurred by visitors injured on the owner's property.

Business insurance can take a variety of forms, such as the various types of professional liability insurance, also known as professional indemnity (PI), which are discussed further below under that name; and the business owner's policy (BOP), which bundles many of the types of coverage that a business owner requires into a single policy, like how homeowners' insurance bundles the coverages that a homeowner requires.

Automobile insurance

Copenhagen's crashed car

When an incident involving the policyholder's own car occurs, such as in a collision with another vehicle on the road, the policyholder is protected against financial damage.

Usually covered are the following:

• Insurance coverage in case the car is damaged or stolen
• Liability insurance, for the duty to protect others from harm or property loss
• medical care, including payment for burial costs as well as the price of treating injuries, paying for rehabilitation, and occasionally losing wages.

keyword: Gap insurance 

When the insurance company for the policyholder does not fully cover the loan, gap insurance pays the remaining balance. Depending on the specific policies of the firm, it may or may not also pay the deductible. This insurance is sold to consumers with low down payments, high-interest rates, and loan periods of at least 60 months. When a person buys a car, a loan company normally offers gap insurance; however, many auto insurance companies also provide this type of coverage to customers.

Insurance for dental and health purposes

Swindon hospital called Great Western

The expense of receiving medical treatment is covered by health insurance. Like medical insurance, dental insurance offers policyholders protection against dental expenses. Every individual in the majority of developed nations is provided with government health insurance, which is funded by taxes. The majority of the time, a company's benefits package includes health insurance.

Insurance against loss of income

Some nations require employers to carry employers' liability insurance or workers' compensation.

When a policyholder is unable to work due to an illness or injury that renders them disabled, disability insurance policies offer financial assistance. It offers assistance regularly for commitments like credit card debt and mortgage loans. Individuals can purchase both short-term and long-term disability policies, however, due to the cost, long-term policies are typically only purchased by those with six-figure incomes or above, such as doctors, lawyers, and other professionals. Short-term disability insurance provides coverage for up to six months, often providing a monthly stipend to cover living expenses and medical expenses.

An individual's long-term expenses are covered by long-term disability insurance up until the point at which they are deemed permanently handicapped and thereafter. Insurance companies frequently seek to get the person back into the workforce before deeming them totally handicapped and unable to work at all.

Business owners who have disability overhead insurance can pay their company's overhead costs if they are unable to work.

Complete permanent disability insurance, which is frequently purchased in addition to life insurance, offers benefits if a person becomes permanently disabled and is unable to practice their trade.

Accident insurance

Article focus: Insurance for accidents

Casualty insurance protects against accidents; it is not always linked to a specific piece of real estate. It covers such a wide range of insurance that many other types of insurance, including vehicle, workers' compensation, and some liability insurance, might be included.

A type of casualty insurance known as "crime insurance" protects the policyholder from losses brought on by third parties' criminal activity. For instance, a business can buy crime insurance to pay for losses brought on by theft or embezzlement.

Any loss or damage brought on by terrorist activities is covered by terrorism insurance.

Kidnap and ransom insurance is created to safeguard people and businesses operating in high-risk regions of the world against the dangers of kidnapping, extortion, unjustified detention, and hijacking.

Businesses having operations in nations where there is a possibility that a revolution or other political events could cause a loss can purchase political risk insurance, which is a type of casualty insurance.

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