Insurance Basics

1. Definition: Insurance is a contract that transfers financial risk to an insurer in exchange for premiums.
2. How It Works:
   • Spreads risk among a group of people.
   • Uses pooled premiums to cover losses for those affected.
3. Key Roles:
   • Insured: The policyholder.
   • Insurer: The company providing coverage.
   • Agent: Facilitates policy purchases.
   • Underwriter: Evaluates risk and sets premiums.

Common Insurance Terms

• Premium: Amount paid for coverage.
• Deductible: Out-of-pocket amount before insurance kicks in.
• Co-Pay: Fixed payment per covered service.
• Policy Limit: Maximum amount insurer will pay.
• Claim: Request for coverage of a loss.
• Benefit: Amount paid by insurer for a claim.

Types of Insurance

1. Health Insurance:
   • Covers medical expenses.
   • Reduces financial burden of medical care.
2. Disability Insurance:
   • Replaces income lost due to inability to work.
   • Covers a percentage of salary during disability.
3. Long-Term Care Insurance:
   • Pays for care during chronic illnesses or disabilities.
   • Includes nursing home care, home health care, etc.
4. Life Insurance:
   • Term Life: Covers a specific time period.
   • Whole Life: Provides lifelong coverage and builds cash value.
5. Property Insurance:
   • Protects property and belongings from unexpected events.
   • Includes homeowner’s and renter’s insurance.
6. Car Insurance:
   • Liability: Covers damage caused to others.
   • Collision: Covers car damage regardless of fault.
   • Comprehensive: Covers non-collision-related damage.
   • Uninsured Motorist: Covers accidents with uninsured drivers.

Additional Insurance Options

• Extended Warranties: Covers repairs/replacement of products.
• Mortgage Protection: Pays off the mortgage if the policyholder passes away.
• Accidental Death and Dismemberment (AD&D): Covers severe injuries or death in accidents.
• Debt Cancellation: Eliminates debts under specific conditions like illness or job loss.