Insurance is an act, business, or system that includes a contract indemnifying the payer of a premium against loss by fire, death, accident, etc. Insurance can be for life, illness (medical insurance), car insurance (comprehensive, third party), house (theft) and so many other things.
It’s A Business
Keep in mind that insurance is a business like any other business; the main aim is profit. No business can survive without profit. It is rather incorrect assumption that the insurance companies can run without making a reasonable profit. In the case of life insurance, the insured pays a certain amount of money for a fixed period and is provided the insurance for that period. If that person dies before the maturity of the policy, the sum is paid to the beneficiary. Insurance companies have “re-insurers” so they get compensated for all the payments they make to the policyholders against the insurance. All the customers insured by a company are unlikely to die simultaneously, so there is only a small percentage of policyholders who get the payment.
The rest of the insured go on paying premiums to maturity. This means the company gets back the amount they paid out plus interest. With medical insurance the insured benefits, but these are just a small percentage of total insured one who get the benefits. For car and house insurance the case is rather different. The amount of the premium is not returned and is supposed to be consumed at the end of the year. If there was no damage or accident during that period, the premium paid goes to the benefit of the company. Additionally, if the insured car had an accident during the year and a claim was made, the premium goes up. In this way the company is compensated to some extent for the loss.
Decisions
Basically, it all depends on the type of policy you have chosen. The insurance companies have the advantage as the terms and conditions of the policy are laid down by them. In the event that you stray away from the guidelines and policies, you suffer heavily as the company will refuse to acknowledge your claim, deeming it invalid since fine print was not followed. Also, when you pay insurance, you invest money with the company. That money is used by the insurance company as investment in other projects for profit. Therefore, while you pay to protect yourself, the company has invested heavily with that amount and will be more than reluctant to give out the money in the event of a claim.
|
