The business of insurance rests on the probability of an uncertain event happening. There are some crucial aspects of this business which makes it profitable for the insurance companies. The uncertainty of an event happening in future is one of the factors. This uncertainty could be related to the time period of happening of an event which is certain to happen in future but it is not sure when it will happen, such as death. The other types of event may or may not happen at all. These could be the damage due to fire or the terrorist attack. Another important factor which makes people take insurance advice is their sense of securing the future monetarily. This aspect makes it important for the people to hunt for the insurance policies with best possible returns and/or with least risk. For this reason, they seek insurance quote from different companies.
We will all over time need insurance, when you learn to drive you have to have insurance, when you go to work you are insured under your employers workmen’s compensation, when you buy your first home you must have insurance on it. While sometimes you may have no choice about the type of insurance that you need, other times you will have to choose your own insurance, learning to choose the right types of insurance depending on the needs you have, is important and a skill you will use over and over again throughout your life.
Knowing how to choose the right insurance starts with understand what insurance does and how much insurance you really need. This will vary depending on your circumstances and what your budget it. For instance if you have a car that is not worth a lot of money, there is no sense in putting coverage on it, however you will still need liability and medical to cover any damages that may arise if you have an accident.
The Same is true for your other belongings, if you do not own a house you may not need home insurance but you may wish to insure your belongings especially if you have a lot of expensive electronics. This insurance is called renters insurance and it protects you even if you are not ready to buy a house.
Other insurance you may wish to consider is insurance on your recreational vehicles, life insurance, health insurance and if you work for yourself you may wish to get business insurance as well. All these types of insurance vary depending on your circumstances, such as age, health and the possessions you want to insure and as always your budget. While you may not be able to buy all of them it is important to get the ones that are most applicable to your life, as well as those that may be required such as home insurance if you are buying a home and car insurance.
It is important to take some time to read about the insurances you are getting ready to buy, you should at least know the differences between liability, collision, comprehensive, as well as when you need them for your car. This is true for all insurances, you can make costly devastating mistakes but not understanding insurance terms such as those that tell you the type of insurance you are buying.
Life insurance is a good example of that, since there is a huge range of prices for the different types of insurance, but how they cover you and how much they pay out ranges just as widely. Does your policy stay the same or can your insurance company change it, does it have a cash value? These are all questions that you will need to know the answer for if you are going to buy life insurance.
There are plenty of resources on the Internet that will give you the basic information you will need, to be able to make choices for your insurance needs. In fact many of the free quote sites that offer you quotes for your insurance needs can give you all the basic information you will need to make informed choices about your insurance. You will also find that many of the insurance company sites will explain all of their policies in full at their websites as well.
You can also go to talk to your agent once you have chosen one, they can answer any questions you have and help you to decide the insurance you should have. If you choose to use one of the quote sites you will have agents in your area contact you with your quotes, before you decide on your insurance be sure to take the time to carefully review the quotes and take care of any research you need to do before you make your final decision.
Once you have an agent or two, they will help you to make your final decisions and take care of all the paperwork. You will have the satisfaction of knowing you took your time and made an informed decision no matter what type of insurance you are trying to buy. One of the best places to start your search for information and for the quotes you will need to complete the process is at Insurance Quotes, we offer a wide range of information about all of your insurance needs and have a free quote form that will allow you to compare your insurance quotes before you buy.
There are dozens of different types of insurance, from insurance that you have to take out by law (such as car insurance), to policies that it’s a good idea to have (such as contents insurance) to those that are ‘nice to have’ rather than necessities.
Figures from the Association of British Insurers show that, during the recession, one in four people cancelled their home insurance. While it’s a good idea to make sure you’re not paying for insurance you don’t need, you should always think about what would happen if disaster were to strike before cancelling any insurance policies.
How does insurance work?
When you take out an insurance policy, you pay a premium to the insurance company. If you never make a claim, you never get any of the money back; instead it’s pooled with the premiums of others who have taken out insurance with a particular firm.
That may not sound like a good deal, but the idea behind insurance is that everyone pays into a pot of money, knowing that only some of them will ever need to make a claim. If you have to make a claim (perhaps because your washing machine has flooded your kitchen and damaged your floor), the money comes from the pool of your and other policyholders’ premiums.
How are premiums calculated?
Insurers are professional risk takers, which means they know the probability of different types of risk happening so they can calculate the premiums needed to create a fund large enough to cover likely loss payments.
Clearly, only a proportion of policyholders will make a claim in any one period. So, an insurer will take two important factors into account when calculating the premium it will charge. Firstly, how likely it is in general terms that someone will need to claim and secondly, whether the person who wants to take out the policy is a bigger or smaller risk than the ‘average’ policyholder.
Take three examples. In motor insurance, a young person with ahigh-powered car, or a driver with a long history of accidents will pay a higher premium than a mature and experienced driver with a car with a smaller engine who has not had an accident before.
Similarly, the owner of a fish and chip shop will pay a higher premium for his or her fire insurance than, say, the owner of an office. The risk is greater, so the premium is higher.
Someone who is young, fit and in a risk-free job will find it easier to buy life insurance and will pay lower premiums than someone who has a heart condition or is in a risky occupation.
The level of premium is also affected by the insurance company’s desire to target a particular section of the market. So, if an insurer wants to encourage younger drivers to buy insurance from it, it may decide to undercut the premiums charged by some of its rivals.
Two kinds of insurance
There are two different kinds of insurance – life insurance and general insurance.
General insurance pays out:
If a car has an accident or is stolen
If a house catches fire or is burgled
If a holiday has to be cancelled
Most life policies, on the other hand, pay out when an event happens, such as when someone dies.
Anyone can buy life insurance but, the amount you pay in premiums will depend on your age, your health, and the type of work you do. The younger and healthier you are, the cheaper the premiums for life insurance. But if you work in a risky job, you’ll normally have to pay more for life insurance.
Most types of insurance are annual policies. That means that the amount you pay can change every year and, if you’ve made a claim in the previous year or your circumstances have changed, it could affect your premiums.
However, some types of insurance, such as life insurance and insurance that pays part of your income if you cannot work because you’re seriously ill, are long-term contracts. That means you don’t get renewed quotes every year as the premium is set when you first sign up.
If you have a joint mortgage with your husband, wife or partner, you can take out life insurance that will pay out if they die before the mortgage is paid off. However, you can’t take out insurance on someone unless you’d be financially worse off if they died.
What is the excess?
With many general insurance policies, you have to pay the first part of any claim – called the excess – if something goes wrong. The level of the excess can vary widely. For a travel insurance policy, it may be £25 – £50 while for a car insurance policy it could be £100 or more.
Sometimes insurers will impose a large excess if you’ve already claimed for something and you’re likely to do so again, such as for flood damage or subsidence(which is when a building develops cracks because the foundations have moved).
Other principles apply to all kinds of insurance:
Insurance can provide compensation only for the actual value of property. It cannot cover the loss of sentimental value, for example.
There must be a large number of similar risks so that the likelihood of a claim can be spread among other policyholders. It must be possible for insurers to calculate the chance of loss so that a premium can be set which matches the risk.
Losses must not be deliberate and not inevitable. Clearly, you could not buy fire insurance for a house which was already burning nor life insurance for someone on his or her deathbed.
Lastly, there are some risks which have financial implications so vast that they can be dealt with only by the state. These risks (mainly those arising from war or the major escape of nuclear or radioactive material) are normally not insurable.