Insurance, in its simplest form, is a written policy that protects the purchaser against risk, usually specified as a “peril” in the policy. The insurance policy will specify in detail which perils are covered by the policy. To pay for insurance, purchasers pay an insurance premium, either in full when they purchase the coverage or in monthly installments. No matter how the buyer chooses to pay the insurance premiums, they are insured at the full value of the policy immediately, and remain insured at the full value as long as they make their payments on time.
There are countless types of insurance including auto, business, casualty, disability, homeowner, liability, health, and long term care. One general insurance policy may also incorporate risks from one or more of the insurance categories. For examples, a car insurance policy typically covers property risk and liability risk. A homeowner’s policy includes property insurance for the home and belongings, liability insurance to cover any legal claims against the owner and often even includes health insurance to cover any medical insurance claims of guests injured on the property.
A company specializing in insurance sales is usually classified as either:
- Life insurance company, selling life insurance, pension products or annuities
- Non-life insurance or general insurance company, selling all other types of insurance. These insurance companies are usually broken down further into either standard line or excess line insurance companies.
Standard line insurance companies typically insure cars, homes or businesses. Most policies do not differ greatly from one buyer to another and typically have lower insurance premiums than excess lines. These companies also sell directly to individuals and are regulated by state laws restricting the amount they can charge each person.
Excess Line Insurance Companies. These insurance companies are referred to as insurance consultants and they operate similarly to mortgage brokers. They are paid a fee by the consumer to do the research for them and find the best insurance policy out of all of the different insurance companies. Similarly, there are also insurance consultants who shop around for the best policy out of many different companies, however their fee is typically paid by the company issuing the policy, not the purchaser.
Insurance companies are rated by agencies, such as A.M. Best, based on the company’s financial strength, as well as bonds and notes the company has issued. The financial strength is a key element, as it indicated the insurance company’s ability to pay insurance claims filed by consumers.
The type of insurance you are attempting to file an insurance claim on will dictate how to actually go about filing the claim. With health insurance, many times the health care provider, such as the general practitioner or hospital will file the claim for you with the insurance company. If you are in a car accident, typically the consumer will call their insurance company to inform them of the accident and file a claim. Look closely at your specific policy to determine the exact procedure your company requires.
Most insurance information can also be found online on top insurance companies’ Web sites. Maybe online insurance sites will also allow consumers to research policy information, as well as pay their premium via the Internet.