INSURANCE BASICS
Insurance: is a contract or device for transferring risk from a
person, business, or organization to an insurance company that agrees (in
exchange for premium) to pay for losses through an accumulation of premiums.
Two
Characteristics of an Insurance Contract
1. Principal of Indemnity: when a loss occurs, an individual should be restored to the approximate financial condition he/she was in before he loss: no more, no less.
2. Aleatory: the concept that you may be buying something that you will never use: protection is only realized in the event of a loss
Basic Insurance
Terms
Insurance company or insurer: is a risk-sharing business that agrees to pay for losses that may happen
to someone it insurers.
Policy: the
contract purchased from the insurance company for insurance protection.
Policyholder: is the purchaser of the policy.
Premium: the fee paid to the insurance company for
insurance protection.
Coverage: the
protection provided by the terms of an insurance policy.
Insured: the person protected by the insurance policy.
Various Types of
Insurance
- Auto
- Health
- Life
- Disability
- Pet
- Travel
- Product (ex: cell phone)
- Homeowners
- Renters
- Personal Property
Types of Risk
In everyday use, the following terms have almost the same
meanings. In the insurance business,
however, each has a distinct and special meaning.
§
Risk—the chance of loss or injury
§
Peril— anything that may possibly
cause a loss.
§
Hazard—anything that increases the
likelihood of loss through some peril.
Most Common
Risks
These risks are types of pure, or insurable, risk.
§
Personal risks involve loss of income
or life due to illness, disability, old age, or unemployment.
§
Property risks include losses to
property caused by perils, such as fire or theft, and hazards.
§ Liability risks involve loses caused by negligence that leads to injury or property damage.
Risk Management
Methods
Risk management is an organized plan for protecting
yourself, your family and your property.
It includes more than buying insurance.
Risk
avoidance- Risk reduction
- Risk assumption
- Risk shifting
Examples of Risks
and Risk Management Strategies
Insurance Links
http://www.state.nj.us/dobi/insmnu.shtml
http://www.metrojersey.com/njinsurance.htm
AUTO INSURANCE HEALTH INSURANCE