The first thought that crosses our mind whenever we hear the word "insurance" uttered is "premium". We tend to overlook the value that insurance bestows upon society- in reducing risk and uncertainty and restoring us to the position we were in before calamity struck. With the help of insurance agencies, our damaged vehicle can be replaced or fixed, our home rebuilt or repaired, and our medical bills paid. Insurance agencies also provide us with the funds needed to replace personal items, and they play a significant role in reducing the incidence of bankruptcies and keeping a tight lid on government debt.
Property and casualty insurance, life insurance, and title insurance are three key categories of insurance that offer important coverage to the average American in his or her daily life. Each of these insurances will be discussed in sequence below:
1. Property and casualty insurance
To protect against risks to property such as floods, earthquakes, thefts, fires, and certain damage caused by weather, residential and commercial applicants may take out property insurance. Named perils and open perils are the two categories of property insurance available to prospective clients. Where property is insured for named perils, the actual cause of loss must be included in the insurance policy in order to be covered. On the other hand, an open perils policy provides coverage for all causes of loss that the policy does not specifically exclude.
Casualty insurance provides protection against accidents, which need not to be connected to any specific property. Property and casualty insurers hire insurance adjusters to address claims concerning bodily injury, liability, or property damage. The main duties of insurance adjusters are to (1) investigate claims submitted by the insured, (2) negotiate with claimants and 3) settle policyholders' claims and authorize payments when claimants' grievances are legitimate. Claims adjusters investigate claims by interviewing witnesses and the policyholder, verifying hospital and police records, and inspecting the premises to ascertain the extent of the insurer's liability. Claims adjusters then check to see whether the loss is covered by the claimant's policy and determine the amount to be paid to the insured.
2. Life insurance
In a life insurance contract, the insurer promises to pay a monetary sum to a designated beneficiary or beneficiaries upon the occurrence of an insured event, such as the insured's death, that is set forth in the policy. The policyholder fulfills his end of the bargain by promising to make stipulated, periodic payments known as a premium. Typically, a life insurance policy permits the insured to decide whether the proceeds should be paid in the form of an annuity (a series of payments) or a lump sum cash payment to the beneficiary. Life insurance contracts cover such events as death, sickness, or accidental death. Insurance agencies rely on mortality tables to calculate the cost of insurance. As part of their evaluation process, many insurers classify their prospective clients into one of four health categories, these being (1) Preferred Best (reserved for healthiest applicants), (2) Preferred, (3) Standard (most applicants fall into this category), and (4) Tobacco. Life insurance policies may be either temporary or permanent. Temporary or term life insurance offers coverage for a specific period of time for a set premium. Permanent title insurance provides coverage until the policy's maturity, and is available in several variations, namely (1) universal life insurance, (2) whole life insurance, and (3) endowment life insurance.
Applicants may also apply for accident insurance which provides coverage for incidents resulting in an injury but usually excludes death caused by suicide or health issues. Accident insurance is significantly less costly than other types of life insurance. Applicants may also add riders to their life insurance policy. Riders allow policy owners, at the time that the policy is issued, to supplement the contract with a desired feature, thus modifying the standard policy.
"Individual" and "group" (i.e. for company employees or trade association/union members) life insurance plans are available to applicants. Generally, insurance brokers or agents sell individual policies and are paid a commission, which is incorporated into the premium rate. Life insurance brokers perform numerous roles, including (1) simplifying the application process for their clients, (2) advising applicants on the amount and type of life insurance that is most suitable for them, and (3) assisting clients in modifying beneficiary designations.
3. Title insurance
A mortgagee and/or purchaser of real property may obtain title insurance to ensure that title is vested in him or her and is free from all encumbrances, liens and title defects, with the exception of those enumerated as such in the policy or otherwise excluded by the policy's terms. Therefore, title insurance protects a lender's or owner's financial interest in real estate against losses and damage. Policies, for instance, typically offer coverage for losses incurred as a result of unmarketable title or of a lack of easement or right of access to the property. An applicant usually acquires the title insurance during the real estate transaction, when a public records search is effectuated. As for insurance premiums, most state governments set and regulate them for the properties in their respective states.