text: Life is loaded with eventualities. These eventualities expresses themselves as either good or bad. As humans, we are limited in our ability to accurately predict the timing of a woeful happening so as to prevent them; we anticipate for the brighter side of life. The limitation of humans and the uncertainties life poses, gives relevance to insurance as a cushioning to the perils of life.
  Insurance is a risk management strategy. It is defined as a contract, which is called a policy, in which an individual or organization receives financial protection and reimbursement of damages from the insurer or the insurance company. The goal of the agreement is to indemnify the insured from damages and losses.
  The concept was coined in ancient time as a risk sharing mechanism by merchants on a voyage. Merchants distributed their cargoes on several sailing ships to reduce the risk of losses due to damages or unforeseen mishap during sail of a particular ship.
  This article is aimed at expounding the nitty-gritty of insurance under the following headings: how, types and benefits.
  How Insurance Companies Operate
  An individual enters an agreement by purchasing a policy that best suit or covers a risk. A policyholder (insured) will then be required to make regular payment of an amount called ‘premium’ to the insurer. Premium charged is usually smaller than the risk being insured. The higher the risk, the higher the premium charged by the insurance company.
  Risk are termed high when they have more likelihood of occurrence. For instance, a house in a swampy terrain is at higher risk of being flooded or submerged during downpour, than a house on a highland. When a claim (a request to an insurer that payment under a contract is due to an insured) is made, the insurer will proceed to indemnify the insured based on the losses covered by the policy the policyholder subscribed to. When a claim is not made, the premium is not refunded by the insurer. It is pooled (loss spread) with those of other policyholders.
  With regards to records of losses that have occurred in the past, an insurance company will be most confident to forecast losses that certain group of policyholders shall have in the future. This is only possible with a larger number of policyholders in contract. Insurance estimations are guided by the law of Large Numbers.
  Types Of Insurance
  Writers have ways of grouping insurance policies to suit their own perception or there write-ups. Irrespective of such classifications, it is important for one to be conversant with the individual types of financial plans. This will enable right choices to be made. Factors such as: nature of work, age, size of family, life-style, environment etc. influences the choice of a policy
  In this section, emphasis will be made to four (4) ‘key’ types of insurance policies amongst others, namely: health, vehicle, life and Fire insurance. The centerpiece remains that everyone needs to be protected by at least on insurance policy.
  According to the Health Insurance Association of America, health insurance is defined as: coverage that provides for payment of benefit as a result of sickness or injury. It includes coverage for losses from accident, medical expenses, disability or accidental death and dismemberment. The outbreak of the global malady, COVID-19 has given pertinence to health insurance, and proven to be the best policy bargain in this contemporary times of health uncertainties.
  In Nigeria, health services are made cheaper and accessible under the auspices of the National Health Insurance Scheme (NHIS). This federal government agency provide social health insurance to Nigerians from common pools made by policyholders. An insured get serviced from a network of designated health providers or hospitals across the federation. With NHIS, lives of Nigerians are safeguarded and life expectancy is improved in the country. NHIS is among the medium government utilize to express concern over the health condition of her citizens
  This is a financial cover against physical damage, bodily injury from accident or theft, during utilization of a vehicle. Vehicle insurance is also known as automotive insurance. Vehicular traffic increases with rising population and blistering movement of people. These traffic are accompanied by rise in vehicular accidents and theft. People without vehicle insurance suffer the most when faced with damages. This is because they may be lacking immediate financial backup or cushioning to remedy the situation.
  With this type of insurance, vehicle owners are guaranteed maximum efficiency of their vehicles. Third party insurance and comprehensive motor insurance liability are types of vehicle insurance. The former is a protection given to a third party for damages, injuries or death caused by an insured vehicle. The latter is a protection that covers the third party and the damages sustained by the insured.
  Life insurance is a contract in which the insurer pays financial benefit to dependents of the insured after the demise of the policyholder. Usually, the death benefit is paid in exchange to the premium invested by the insured. It cannot be established without the policyholder revealing past and present health transcript, as well high risk activities undertaken. There are two types: term and whole life insurance.
  With the term policy, benefit is paid when death of the insured occurs within the length of the contract. This is usually between one (1) to thirty (30) years. Whole life insurance extend beyond thirty (30) years. It covers for the entire life span of the insured. Benefit is paid to the insured dependents after demise, on the condition that premium payment were maintained.
  Fire insurance is a type of policy that offers protection to buildings against fire disasters. This type of policy is classified into fifteen (15) types, on the basis of hazards, insured risk, business types and policy rules. Fire insurance is most important to areas vulnerable to fire disasters such as market places or when the worth of a property exceeds the cover to be provided by the insurance company.
  Benefits of Insurance
  Financial Protection Against Rainy Day
  This is a major fundamental benefit. To an entrepreneur, there are moments business suffer loss due to wrong decisions made, fraudulent transactions, disasters, fluctuations in demands et all. The progress of the business is dependent on the impact of such losses. To some businesses, the impact of a loss could lead to bankruptcy, total closure, or a fall in robustness. It is a cushioning against losses and assurance for continuity in business to an insured entrepreneur. To an insured individual faced with mishap, there is rest of mind and hope of a brighter future.
  Legacy Benefit for Family Members
  The brevity of life is an indication that mortals have finite existence on earth. Most times, legacies will always be remembered on the strength of financial investment a decease left behind. The family of a demise policyholder will be financially secured of the future, from the proceeds of the investment made with an insurer. Hence, it could be pictured as a financial investment or security for the future generation.
  Remedy for Inflation
  Inflation is an economic condition were too much money purchases fewer goods and services. The premium collected by the insurance company is used to reduce the amount of money in circulation. Thus, controlling inflation.
  An insured develops a saving habit from the regular premium paid at intervals. This virtue restrains the insured from impulsive spending. Insurance can also be seen as means of developing admirable financial attributes. Find out more on the subject of savings here.
  Support for Securing Loan
  Sometimes, most financial institutions are restrained from issuing loans to customers because no substantial collateral is available to backup credit request. An insured could easily obtain such loans using the security of a policy as collateral.
  In conclusion, it is worth noting that only those who want to luxuriate in the future amidst uncertainties, plan using insurance. The benefit it offers, approves it as the best financial security to subscribe to in this contemporary time.
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