HOW TO TAKE OUT AN INSURANCE
Taking out an insurance means to insure or buy an insurance policy, if you take out insurance, you buy coverage from an insurance company. Insurance is a means of protection from financial loss. It is a form of risk management, used to mitigate against the risk of a contingent or uncertain loss.
An entity which provides insurance is known as an insurer or an insurance company, an insurance carrier or an underwriter. A person or entity who buys insurance is known as a policyholder, while a person or entity covered under the policy is called an insured. An insurance policy is basically a contract between you and your insurance company, it lays out what’s covered, what isn’t, and other details of your insurance agreement.
The life and property of an individual is surrounded by the risk of death, disability or destruction. These risks may result in financial losses. Insurance is a prudent way to transfer such risks to an insurance company. Insurance is a legal agreement between two parties i.e. the insurance company (insurer) and the individual (insured). In this, the insurance company promises to make good the losses of the insured on happening of the insured contingency. The contingency is the event which causes a loss. It’s called a contingency because there’s an uncertainty regarding happening of the event. The insured pays a premium in return for the promise made by the insurer.
The insurer and the insured gets a legal contract for the insurance, which is called the insurance policy. The insurance policy has details about the conditions and circumstances under which the insurance company will pay out the insurance amount to either the insured person.
The most common types of insurance an individual might need includes:
The importance of buying an insurance cannot be over emphasized, this is because of the benefits of having an insurance coverage. The most important benefit of insurance is the payment of losses, an insurance policy is a contract used to indemnify individuals and organizations for covered losses. It also helps in managing cash flow uncertainty, insurance provides payment for covered losses when they occur, therefore, the uncertainty of paying for losses out-of-pocket is reduced significantly.
A third and uncommon benefit of insurance is complying with legal requirements. Insurance meets statutory and contractual requirements as well as provides evidence of financial resources. Insurance also helps in the efficient use of an insured’s resources. Insurance makes it unnecessary to set aside a large amount of money to pay for the financial consequences of the risk exposures that can be insured, this allows that money to be used more efficiently.
Another uncommon, important benefit of insurance is support for the insured’s credit. Insurance facilitates loans to individuals and organizations by guaranteeing that the lender will be paid if the collateral for the loan is destroyed or damaged by an insured event. This reduces the lender’s uncertainty of default by the party borrowing fund. Insurance also reduces social burden, it reduces the burden of uncompensated accident victims and the uncertainty of society.
To take out an insurance policy, you can purchase your insurance policy through an individual agent, a corporate agent or a broker. You can also buy your policy directly from the insurance company and some of them can be bought on the internet. An agent or a corporate agent or a broker may also sell insurance through tele-marketers.
Whatever channel you choose to buy insurance, it is important that you ensure that you are dealing with an authorized channel, ask questions, get information and clear your doubts. An agent or broker must be licensed. Other relevant information to verify include details of the policy, the benefits, what the policy excludes or does not pay for, clarifications regarding documentation and procedures at the point of claim. Thus you can take out an insurance policy directly from an insurance company, either online or by phone, through an insurance broker, through a financial adviser, as part of another package, for example with a bank or building society account.
Things to consider when taking out an insurance includes, what you need your policy to cover, what you do not need cover for, what exclusions the policy might have, who the policy covers – you, your family or loved ones, shop around for the best deal, but never buy a policy based on price alone – the cheapest policy may not cover all of your needs. It is also important to answer all the insurer's questions honestly and to the best of your knowledge, the information your insurer needs will be relevant to the policy you are buying.
You should have a good understanding of the risks you face, the value and details of what you want to insure, and the amount of excess you’ll accept. Find out about the cooling off-period so that if you change your mind about an insurance purchase, you can cancel the policy. Under law, most general insurance products have a minimum 14-day cooling-off period. Cancellation may still be available after the cooling-off period ends, but you may be charged a cancellation fee.
Thus, before you buy an insurance policy make sure you consider what things you might wish to insure, and the risks you may face, familiarize yourself with the range of products and providers available, it is important to also determine if you are already covered. Ask questions. When comparing policies, ask insurers about the features you need, and any exclusions or applicable excesses, understand the value of the item you are insuring and the financial impact of paying for the loss you are insuring against, also consider any additional cover you may need, as well as check cover limits.
In conclusion, when taking out an insurance, ensure that you purchase only from a licensed agent or insurance broker, the insurance policy terms and conditions should be read carefully, and it is best to go for an insurance product that best suits your needs.
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