An insurance policy refers to a financial contract between an insurer and policyholder. The insurer makes a commitment to pay in the event that the person insured or their property suffers a type of loss that is stipulated in the policy. Insurance is a financial product that is sold by insurance companies with the aim of safeguarding one and their property against any risks of loss, theft or damage, be it burglary, flooding, accident among others.
Insurance companies work by managing a pool of premiums to ensure that there is sufficient funding available that can sustain policyholders in the event of a claim. Insurance pays only for those products that are insured against loses. As a policy holder, it is quite essential to read the policy and keenly talk to your insurance representative on all products you are covered on.
How it Works
When you buy insurance, you are supposed to make regular payments that are known as premiums to the company or party that has insured you. As a policyholder, you have to make a claim, and your insurer will pay you for any loss you suffer according to the products covered in your policy. If you fail to make a claim, you will not get your money back for any loss you make that is covered by the policy.
To decide on the type of insurance you need, you need to factor in a few aspects which include; why you need the cover, what you want to include in the cover, how much you can afford for the cover, how long you want the cover to last and whether you want the cover by yourself or if you want it included for your loved ones.
If you want to buy insurance, there are a couple of ways you can do about it; you can contact the insurer directly be it over the phone or through the internet. You can seek advice from a professional insurance broker or just speak to an independent financial advisory. Additionally, you can check comparison websites to get the best deals on the type of insurance you are looking for.
Insurers use risk data in their calculations to determine the likelihood of an event the policyholder is insuring against the event happening. They then use this information in working out the total cost of a premium. If there is a high likelihood that the event you are insuring will happen, it leads to the insurer offering you a higher cost against your premium.