Insurance policies and how helpful they are.

Insurance is an agreement between the two parties who are the insurance company and the insured where the insured pays premiums to the insurer to pay for his losses occurred because of some unexpected happening. The insurance company pays a certain amount of cash to compensate for the loss the insured faced.

What is Insurance for?

The insurance agreement can be of anything, whether it is an automobile insurance, and workplace insurance or may be a life insurance for that matter. There are some unusual insurance too, like the footballers like Lionel Messi and Cristiano Ronaldo have their legs insured against any injury.

It provides financial covering to the insured in an event of accidents which might affect their financial status and tries to restore the insurer to the former state where he was in before the happening.

Know all about the insurance company you are dealing with

Before getting insurance from a company, it is really important to know certain things about the company you are planning to partner with. There are a lot of things you must check, and the business ratings, frequency of payments and claim settlement ratio are the main things to check. Since it is your hard earned money, you should be really cautious and should not invest in a company which might take away your money and cheat you.

Dealing with the agents

The commission agents also help you get insurance and a lot of them to work for the insurance corporations itself. Other agents are actually representatives of the firms who sell insurance policies of various companies. They do it for a particular amount of profit, termed as commission.

But with the technology advancing, you can find anything on the internet and get the list of the policies along with their terms and conditions. The prominent insurance companies have strong web portals where they help their customers. Online support and chat options are also available if someone needs clarification on any doubt.

Term life insurance works best for most of the people except those who have different money needs. It is reasonable than the other types of policies and widely asked for.

The premium on the life insurance policies increases really fast, so, people take a term policy of twenty to thirty years to lock the amount so that they do not have to pay higher premiums later.

People do not realize how important insurance policies are and if you do not get it early, it might get too late and will affect you later in life.

Insurance coverage decisions should be taken early in life. These require small contributions in the form of premiums but increases with the age and after a certain age do not make much sense. As we age there are several health issues which grab us and hence the insurance companies to become reluctant to offer insurance coverage to people or lower the limit of the coverage with several conditions.

So it is best to take insurance policies at an early age and cover your family so as to avoid any huge expenses in case of urgencies.

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Criteria of Insurance Underwriting

Insurance is some something which is mandatory for each and every individual. Getting an insurance policy is no big deal given the host of companies available out there. However, getting an insurance policy at the best rates and favorable terms is a matter of concern. There are several underwriting criteria’s used by the insurance company to keep their insurance risk to the minimum, optimize their profits and ensure that they keep building upon their market share so as to remain in competitions.

Underwriting Criteria’s

There are a few criteria which are employed to decide the eligibility of the rates and premiums of the insurance which is given to the holder. In the process of underwriting the criteria, Comparative criteria is the one which is continuously taken into consideration.  They have to make sure the rate of interest depends upon the risk involved, but they cannot even go beyond the market rates otherwise their policy will not be bought by the people. If the company does not stand anywhere in the competition, then they are more likely to be neglected and not suitable for the policy seekers.

Another idea which is employed in underwriting is Identifiable criteria in which the losses in the insurance are identified and analyzed upon. It is seen that whether the loss incurred is genuine and the cover should be given or not in such a case. The losses which cannot be clearly known are not thought over by the underwriter.

Estimation of the losses

Predicting the potential loss is a part of this analysis and in case the losses cannot be predicted, then there can be no certainty in respect to the insurance company. Bomb blast or radiation is one of its examples. No one can predict the amount of loss which must have occurred in such a situation. It is a global loss and lasts for thousands of years and calculating the financial loss in such a situation is impossible.

Inherent risks involved

One can expect an insurable risk and being insured for that is not possible. For example, you stay in a place where flood is about to start and you rush to the insurance company to get an insurance, you will get it as the flood has already started there and being insured for an expected risk is not what happens.

This criterion is the economy of scale where the thing which is being craved for by a lot of people is not possible. Insurance is based on the law of economies scale, the smaller the quantity of the insured is there, the higher the premium. This leads to more competition and additional want of insurance policy leads to competition in the business.

The insurable risks are natural events which have high risks. The risk is supposed to be easily identifiable and no delay is done in the same. The insurance underwriters know whom to insure and whom not to and what all situations should be taken into consideration while doing the underwriting and setting a criteria.

 

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