What are the basic types of insurance? What is their role in risk management? To know about the different types of insurance, read on…

Life, today, is full of risks and adventures on every step. As man has started playing with nature, natural disasters have frequented. The speedy and stressful life in this competitive world of today has become a cause of the decline in the overall health of individuals. Loss of life and property has become a commonly occurring incidence today. With the changing times, the need of risk management has increased, thus elevating the requirement for the insurance of life and property and other needful resources.

Insurance is an effective way of risk management and is defined as an equitable transfer of the risk of a loss in exchange of a premium. Every quantifiable risk can be insured. Here is a look at the different types of insurance.

Basic Types of Insurance

Health: Health insurance policies cover the costs of medical treatments for various types of diseases that threaten human life. Disability insurance is considered as a different type of insurance that aims at providing financial support to the physically disabled individuals in society. Casualty insurance policies cover accidents.

Life: Life is priceless! However, there are measures to ‘insure’ it. Life insurance policies provide a monetary benefit to the descendants of the deceased individual. They also aim at providing the insured person’s family with burial and funeral expenses.

Property: Property insurance insures property, thus protecting it against threats like fire, theft or damage due to harsh weather conditions.

Credit: Credit insurance policies are meant for the repayment of loans in case of death, disability or unemployment of the borrower.

Take a look at the list of the different types of insurance.

Accidental death and dismemberment insurance: This insurance covers death and injury that results from accidents. Death that results from illness, suicide or natural reasons is not covered under this type of insurance.

Automobile insurance: Vehicle insurance as it is also called, is an insurance that covers the risk borne in traffic accidents and liabilities that can result from accidents.

Guaranteed Asset Protection insurance (GAP) comes supplemented with automobile insurance policies. The losses that vehicle insurance policies do not cover are handled by the accompanying GAP insurances.
Public auto insurance is an automobile insurance scheme owned by the government. It predominantly operates in British Colombia, Manitoba and Quebec.
See more on Car Insurance.

Boiler insurance: It indemnifies the insured against the expenses that may have to be borne for the repair or replacement of home boilers as well as the plumbing, heating and electric systems of the household.

Bond insurance: In this insurance service, the bond issuers can pay the premiums to a third party in case of failure on part of the issuer. In such cases, the third party provides the interest and capital repayments prescribed by the bond.

Business overhead expense disability insurance: The person who is insured by this type of insurance manages the risk of his/her disability by arranging the insurance authority to bear the business overhead expenses in case of the business entrepreneur’s disability. Business insurance is an excellent way to insure a business.

Casualty insurance: It covers the loss that results from an accident. It may bear the expenses of the vehicle loss or the costs incurred in restoring the damages resulting from accident. Casualty insurance policies do not cover life, health and property losses.

Catastrophe bond: These bonds are meant to transfer the responsibility of a certain set of risks from the shoulders of the sponsors to the investors.

Chargeback insurance: This insurance is meant for the business merchants who accept credit cards. When accepting credit cards for purchases involving large money transactions, merchants risk their business. Fraudulent behavior on part of the credit cardholder or the use of unauthorized or invalid credit cards puts the merchant’s money at stake. Chargeback insurance policies protect the merchants from these risks.

Contents insurance: It covers the loss or damage to the personal possessions of an individual while they are located in one’s home. The insurance might also cover the possessions kept in the exterior of one’s household, such as things kept in one’s garden area. These insurance policies find utility for people renting houses. It is generally purchased in collaboration with a home insurance policy.

Corporate-owned life insurance: The employing companies hold this insurance for covering the sudden losses of their employees. Originally, these insurances were held by companies to cover the risk of the death of their key employees. This insurance insures the cost incurred on the recruitment and training arrangements that have to be made in case of an unexpected death of any of the company employees.

Credit insurance: Credit insurance policies are designed to compensate for credit risks in business.

Crime insurance: Employee thefts and offenses causing financial losses to a business are covered under crime insurance policies. Crime insurance can be used to cover the damage caused by crimes such as murders and rapes.

Critical illness insurance: Critical illness insurance policies prescribe a list of diseases to be grouped under the class of critical ones. The policyholders are insured in case of being afflicted by any of the diseases enlisted as critical in the policy. The policy may be structured to provide the insured individual with regular payments or a lump sum amount on being diagnosed for one of the critical illnesses.

Crop insurance: Agricultural producers purchase this insurance to protect themselves against a loss or damage to their crops on account of natural disasters or revenue losses.

Dental insurance: It is categorized under the class of health insurances and is meant to pay the costs incurred on dental care. Considering the increasingly expensive dental treatments, dental insurance policies form an important section of health insurances today.

Deposit insurance: These insurances protect the deposits in event of bank runs. A bank run is said to occur when a large number of customers of a bank withdraw their deposits from a bank. Deposit insurance aims at covering the risk of running into this kind of financial crisis.

Disability insurance: Disability insurance covers the insured individual’s earnings against the risk that a disability can make working impossible for him/her. Disability insurance policies are arrangements to secure one’s future in case the individual is unable to work and earn. Learn about Short Term Disability Insurance.

Earthquake insurance: It is a type of property insurance, which covers the risks borne by houses on account of frequently occurring earthquakes. It insures the damage caused to property as a result of earthquakes. It is widely used in Japan and California.

Expatriate insurance: This insurance covers the losses that one may have to suffer from, while residing and working in a non-native country. An expatriate insurance policy has to be purchased before one relocates to another country. It covers the period of stay in the non-native country.

Fidelity bond: These bonds serve as a protection for a businesses from the fraudulent behavior of its employees.

Flood insurance: It covers the damages to property that result from floods. Around 20% of the households in the United States are insured for flood, as they are susceptible to them.

General insurance: General insurance schemes include policies for automobiles, homeowners and precisely any insurance that does not fall under life insurance. General insurance policies cover losses resulting from certain financial events.

Group Insurance: It covers the risks borne by a group of people. Group insurance policies are generally purchased for a group of members of a society or a group of professionals in an organization. It is less expensive than individual insurance policies.

Health insurance: The expenses incurred on treating physical disabilities, long-term nursing and custodial care are covered under health insurance schemes. Health insurance policies insure the payments for medical care. Know more about

Health Insurance Coverage
Health Insurance Plans

Home insurance: It insures the losses incurred on restoring the damages resulting from hazards to households. Home insurance policies cover the losses of the personal possessions of the homeowners.

Perpetual insurance is a form of home insurance in which the coverage is valid for perpetuity and that the policy does not have a designated date of expiry.
Also see info on Second Home Insurance and Mobile Home Insurance

Injury cover: It includes the compensations for work-related injuries. It can be used along with health insurance, workers’ compensation or personal injury services.

Keyman insurance: Keyman insurance policy is the one purchased by a businessman to secure the potential losses of his resources and cover the incapacity or death of a key employee. Keyman insurance protects you from the greatest of business risks.
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