Insurance: The place of insurance over ages and as far a human existence is concerned can never be underscored, in this period of regeneration it calls for organizations and economics to re-calibrate their security architecture, embark upon massive infrastructural development, improvement in social safety nets scheme and reign business continuity plans.
It is therefore a contract represented by a policy in which an individual or an entity receives financial protection or re-imbursement against losses from an insurance company.
It is a form of risk management primarily used to hedge against the risk of contingent or uncertain loss. Simply put, insurance is a protection against uncertainties.
The main aim of an insurance policy is to give individuals soft landing in the case of eventualities.
History of Insurance
Insurance has a history that dates back to the ancient world, it has developed into a modern business of protecting people from various risk in the ancient world the first form of protection were recorded by the Babylonian and Chinese traders.
It was embarked upon to limit the loss of goods; merchants would divide their goods among various ships that would cross through dangerous waters.
But one of the first documented loss limitation methods was noted in the code of Hammurabi which was written around 1750BC, under this method a merchant receiving a loan would pay the lender an extra amount of money in exchange for a guarantee that the loan would be cancelled if the shipments are stolen.
Modern insurance can be traced back to City’s Great Fire of London which occurred in 1666, after it destroyed more than 30,000 homes, a man named Nicholas Barbon started a building insurance business, he later introduced the city’s first fire insurance company and in the late 19th century accident insurance was made available.
Benjamin Franklyn is also a notable name in the history of insurance; he started a company in the 1950’s which collected contributions for preventing destructive fires from destroying buildings.
As the 1800 era passed insurance companies evolved to include life insurance and served other form of coverage, the need of car insurance grew that it was later made mandatory.
Notwithstanding, lots of modifications have has been witnessed in the insurance sector and are geared towards meeting with the current day realities and the ever evolving needs of consumers.
How Does Insurance Works?
Knowing how an insurance works is as important as knowing what an insurance is, this will serve as a road map to individuals whom may want to go into an protection deals.
It consist of an individual (The insured) paying a company (The insurer) a monthly fee (premium) for protection from unforeseen contingencies.
An insured person is a person who has already entered into and insurance contract while the insurer on the other hand is the company that provides the protection services when a ever a need comes up.
An insurance works by pooling together the resources of a large number of people who have similar risk to make sure the few people who will experience loss are protected.
When an individual pays a protection premium, such person will be entitled to some benefits, the individual’s claim of loss must be covered in the insurance policy.
However, having the aforementioned in mind it is very vital to know the basics of an protection contract.
Some Basic Terms:
Agent: A person who sells insurance policies for a company
Assured: An individual who has a protection policy, can also be referred to as “insured”
At-fault: Someone that is responsible for an accident, the person who is liable for damages.
Carrier: Another name of the insurance company that provides the policy
Claim: This refers to any claim for payment within the bounds of an insurance policy.
Coverage: These are the specific protections an insurance policy provides, this is usually found in the declaration page.
Damage: This refers to the actual loss in case of an accident, or harm to a person
Damages: This on the other hand means the actual money an individual is required to pay another.
Claimant: This refers to any person that or entity seeking for compensation from the agency company.
Named Insured: This is the name of individual or entity that an insurance policy covers.
Replacement Cost Coverage: This is the cost of replacing property without subtracting depreciation due to wear and tear.
Loss: Refers to damaged caused by an insured piece of property. A covered loss refers to any loss or damage that an insurance policy specifically provides protection for.
Limits: This refers to the maximum amount of protection the insurance company agrees to pay for a specific coverage in any given claim.
Liability: This refers to legal obligation or responsibility one party has for causing a damage or injury.
Estimate: This is the amount of money required to repair or replace a a covered property when damaged.
Electronic Fund Transfer: This refers to the method of payment in which the agency company electronically deposits the claim amount into the account of the insured.
Indemnity: this means making compensation payments to one party by the other for the loss occurred.
Basics of an Protection Contract:
The basics of an insurance policy include the following;
- Declaration page
- Insuring agreement
The Declaration page
The declaration is the first page of in insurance contract, states exactly what the insured has in mind to cover, when it’s a property that will be covered, the name of the property will be stated clearly and a well detailed description of it will also be captured.
In the case of a life protection, the person’s particulars which will include age, name and address will be stated also. The declaration page also states the policy duration and limits.
The Insuring Agreement
Just as he name implies this agreement which is the second part of an insurance policy contract, is where the both parties that are involved (The insured and the insurer) come to terms on how the contract will be executed, this part tends to answer some vital questions such as; what amount would be paid as premium?
How much will be paid in an event of loss? What is the time frame of the contract? In this part, the insurer makes it clear and agrees on some the services he can render to the insured.
This part of the contract explains some of the risk that may not be covered when there are uncertainties. Exclusions can be further classified into three categories, they include;
a) Excluded perils or causes of loss
b) Excluded loss
c) Excluded properties
Excluded perils are usually related to natural disasters such as flood, earthquake e.t.c Excluded loss on the other hand, taking automobile for an example no benefits will be giving when there is damage as a result of wear and tear and finally excluded property covers personal properties such as pets, mobile phones etc.
Conditions are things that are introduced to the policy that are capable of restricting or placing limitations on an insured in other for him to keep to his own end of the bargain.
This usually comes in form of conditions and in cases where such conditions are not met; the insurer can compromise the claim. A very good example is an insured providing a proof that shows that the company should be protected after a loss.
Types of Insurance:
There are various types of protection policy available for individuals to enjoy, depending on the one an individual deems fit to be party to, having in mind that all the types of insurance has its own peculiarities and different methods of approach when a need or challenge arises.
Thus, the type includes the following;
- Life insurance
- Health insurance
- Family insurance
- Business insurance
- Home and rent insurance
- Long term care insurance
- Property insurance
And many more… READ MORE: Business Loans Can Boost Your Business.
Do One Need An Insurance To Start Up a Business?
Everyone that is planning to go into any form of business needs an protection contract cover because apart from making look credible.
It keeps your business up and running, business starters are bound to face various ups and downs in their business until their foot hold in the business gets strong to a greater extent.
Finally because you cannot predict the future but with proper business protection, small business owners or starters can achieve peace of mind and channel more of their effort on sustaining the business in years to come.
The Importance of Insurance to the society at Large:
With the current day realities lots of uncertainties are occurring repeatedly, business owners and individuals are exposed to various degrees of risk, it’s only when getting an Protection coverage is put into consideration that this challenges will have little or no negative effect on an individual or business.
Looking at it from an economic perspective, the role of insurance can never be underscored because it serves as a backbone to various economic activities.
It’s very obvious that insurance played an important role and still playing a vital role even in the face of corona virus, especially when the virus was at its peak and which led to the crumbling of various economic activities all over the world.
Most business that does not have one form of business protection coverage got folded completely but it was a different ball game for the businesses that were covered.
They revived with ease and were back on limelight again. In other words, without an insurance coverage many countries would still be battling with economic backdrop as a result of the corona virus.
In addition to this, insurance helps the future expenses of the family to be lesser, it makes one to worry less and not to be thrown off the track when casualties or unplanned expenses comes up, life insurance and health insurance policy fits in perfectly in issues like this.
One can also access benefits when he/she has a chronic illness that might be life threatening.
Furthermore, it helps you to be secured, even in your absence your family members can still access your benefits even when you are no more and where kids are involved their academic future can also be properly safe guarded financial wise.
Weaknesses of Insurance:
Notwithstanding the above benefits, it still have a number of weaknesses which includes;
- Difficult terms and conditions
- It is selective ( only the rich can afford it)
- It’s very expensive
- Too much an long legal formalities
- It’s temporal and can be terminated easily.
In conclusion, it is crystal clear that it has more of merits than demerit since its benefits outweighs it weaknesses, as far as human existence is concerned uncertainties are inevitable so it is advised that everyone should be proactive against it and the only way through that would be achieved is by getting an insurance coverage.Please Help Share This Post