How insurance works and how the insurance company operates?
Insurance is a financial tool that gets a small amount from many individuals in the community and covers the risk of very few people’s belonging (Life, vehicles, Loans, Business).
By doing this both Insurer and insurance company benefits. Insurance is a wonderful tool that covers the risk in your life with a small premium.
Even though no one knows to lose their belongings, it’s always better to live happily if that risk is covered. On the other hand, the insurance company gets a profit from the small premium paid.
The insurance company works based on permutation and combination. The company calculates the risk of the person losing the belonging and calculates the premium.
For Example, A Non-smoking Person who dies before 50 years vs a Smoking person who dies before 50 years.
You know the possibility, of course, the person who smokes has more possibility of death. Thus insurance company charges more premium/fees from smoker than a non-smoker.
Even though in many cases, the possibility of either one happening is very low as the life expectancy of an average human is 70.
Insurance companies get the premium from many individuals and provide support to an insurer if he/she losses the belonging. The whole insurance process helps society to live
without fear of losing everything in case the event occurs.
The insurance company gets the premium from 1000’s people in a community and pay 10-20 people who suffered the risk. Historically this concept is working for more than 1000 years.
Why you should be insured?
If you are not rich with generational wealth, you should have insurance. If you lose any of your belongings, it is hard for you or your family to get to your current
lifestyle. It needs at least 5-10 years to reach the current lifestyle creating a huge void in life due to the loss of belonging. It is easy for anyone to bounce back if we have financial support in our current world.
How much money should be calculated as cover?
The cover should manage the cost of belongings. To explain in detail, if are insuring your mobile. The cover value should be able to replace you with the new mobile with the latest technology. Same for vehicles, House, accident, or life. The cover should be able to cover the expense of belonging at the current value.
When it comes to life insurance, it should be able to cover at least 10-15 years annual income of the current income. The value should be calculated with a 5-8% inflation rate.
Which company to choose from?
Please should buy insurance from any new or unknown or non-reputed company. You cannot risk losing the belonging as well as the insurance cover. Buy insurance only from
well-reputed company in the market.
Do not try to buy cheap insurance, the policy may not cover all the category causing you trouble in covering the belonging.
Always buy all-inclusive insurance, covering all your belongings risks.
How much you need to pay for your belonging?
In general, the premium of the insurance will be 1.5-2% of the belonging’s value per year. Anyone can afford to pay the premium to cover the loss of the belonging.
How much money insurance company make?
The insurance company will be monitored by a government board and they will be paying the insurer in case of any loss for the belongings. Historically insurance companies make 10-12% profit
of the revenue. The insurance company always covers at least 90% of requests. If the request is valid, the insurance company is obliged to pay the amount to the insurer.
Hope you are clear on the insurance and why you need insurance.
If you have any doubts, provide the details in the contact form.
Signing-off,
Chandramouli
