Here are 8 FAQs on Basic Insurance Concepts:
1. What is insurance?
Insurance is a financial agreement where you (the policyholder) pay a regular fee (premium) to a company (insurer) in exchange for financial protection against specific risks or losses.
2. Why do I need insurance?
Insurance provides peace of mind and helps you financially recover from unexpected events, like car accidents, illnesses, or property damage.
3. What are the two main types of insurance?
Life insurance:Provides financial benefits to your beneficiaries upon your death or after a set period.
General insurance:Protects against various non-life events like accidents, illnesses, property damage, etc. Examples include car insurance, health insurance, and homeowners insurance.
4. What’s the difference between premium and deductible?
Premium:The regular payment you make to the insurer to maintain your policy coverage.
Deductible:The amount you pay out of pocket before the insurance company starts covering your claim.
5. What are some common terms in an insurance policy?
Coverage:The specific events or losses the policy protects against.
Benefit:The financial compensation paid by the insurer for a covered event.
Beneficiary:The person who receives the pay out from the life insurance policy upon your death.
6. How does filing a claim work?
If a covered event occurs, you contact your insurer, file a claim, and provide necessary documentation. The insurer reviews your claim and pays the benefit if approved.
7. What factors affect my insurance premium?
Age, health, driving history, location, type of coverage, and claims history can all impact your premium.
8. Is it better to have more or less coverage?
Having more coverage provides greater financial protection but comes with a higher premium. Balancing costs and your needs is important.
