Insurance is a contract between two parties for a promise of certain amount called Face Amount or Coverage in the event specified in the terms and conditions within the policy in exchange to sum received called Premium for a period of time.
There are two types of insurances – Life and Non-life. Life is a protection covering the life of a person and Non-Life refer to material things or properties. Life insurances are mostly participating which yields dividends and earns cash values whereas Non-life insurances are mostly non-participating because it is usually a Term Insurance. Term Insurance is the cheapest available insurance as it only guarantee coverage as long as the insured is paying the premium. One example of Term Insurance is Home Insurance.
Homeowners would like to protect their hard earned money by insuring their homes and if possible its contents. How do we get the best deal out of insurance companies? What coverage suits best our needs? Should we get a simple building insurance or a comprehensive one that extends coverage to contents and dwellers?
Insurance is a required document for mortgages of same kind. For example, a bank requires a homeowner to get an insurance to serve as collateral for loan applied for. This insurance will pay off outstanding balance in the event of untimely death of mortgagee. An insurance that covers almost all your needs may require bigger premiums, and vice versa. One should bear in mind that not all insurance companies have the same terms and conditions on their policies.
A rider is an additional benefit that can be attached to a basic plan with added premium. There is also the difference in paying period, there is a term insurance that can be converted to permanent plan after such time, or a whole life plan that can be surrendered with dividends already added, and some products have non forfeiture options for those who do not want to pay further premiums. There are also clauses to the contracts that can be attached; like a woman who is pregnant can add pregnancy lien to her insurance to be able to redeem premiums paid in case something happens to her during her pregnancy or pregnancy extra that may allow claimant for all benefits due the insured.
The best way to invest in insurance is to scout for quotations from different insurers. Company profile must be checked and verified, including financial statements to establish how solid the capital of the insurer to cover the Face Amount. An insurance company which can ensure protection while you are paying and beyond your working years are good enough for an amount that you can put aside every year. Ask questions like reinstatement period, expiry period, lapses in payments, annuity schedule and non forfeiture options because you might be shocked to know that your insurance expired after missing one premium.
These are conditions that you must understand and be cautious about because if you overlook it, you might put all your investment to waste. If the insurance company can cover your house from natural disasters, robbery and fire then that’s the best policy to get, because that’s the most important reasons why we want to insure our homes in the first place. Do not get insurance that have open-ended promises like pre-need plans. These are plans that may not be met when the time comes for you to claim as economy cannot be determined years from now.
As careful as we are with our investments, remember that insurance companies are trying to protect theirs too.