essay on types of insurance
Answers
Insurance companies are generally classified as either mutual, or stock companies, but this is a traditional distinction as true mutual companies are becoming very rare. Mutual companies are owned by their policyholders, while share- / stockholders (who may or may not own policies) own stock insurance companies.
Broadly speaking, insurance carriers may be classified as:
Life insurance companies, which sell life insurance, annuities and pensions products. Life, annuity, and pension business is very long-term in nature — coverage for life assurance or a pension can cover risks over many decades, and explains why this type of insurance is also called “long term insurance”.
Non-life (or ‘general’) insurance companies that sell "other" types of insurance. By contrast to life insurers, non-life insurance cover usually covers a shorter period - such as one year - which is why this type of insurance is also called “short term insurance”.
General insurance companies can be subdivided into:
Standard lines / personal lines insurers that are typically "main stream" lines insurers that specialize in motor, home or commercial insurance that may even be made available directly to the public , or
Excess lines insurers that typically insure risks not covered by the standard lines market. They are broadly referred as being all insurance placed with non-admitted insurers. Non-admitted (USA) insurers are not licensed in the states where the risks are located. These companies have more flexibility and can react faster than standard insurance companies because they are not subject to the same regulations.
Insurance provides protection from financial loss. It is a form of risk management in which a company or state gives a compensation for specified loss, damage, illness or death in return for payment of a specified premium.
There are many types of life insurance. Term plans are the most basic form of insurance. They are affordable and cheaper compared to other forms of insurance.
Endowment plans charge higher fees but they pay out the sum assured under both the circumstances of survival or death.
Unit linked insurance plans or ULIPs are linked to the markets. Individuals can choose the allocation for investments in stock or debt markets. They are a combination of investment and insurance.
Whole life policy covers a policy holder throughout life. The person pays regular premiums until his death after which the money is paid to the family.
Money back policy is similar to the endowment plan. It gives periodic payment during the policy term.
Thus we see that insurance plays an important role in giving financial protection against uncertain events.