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Insurance Basics

Insurance is a method of risk transfer, in which individuals pay regular premiums to an insurer in exchange for compensation in the event of a loss. Individuals can purchase insurance to cover life, health, property, and liability risks.


Nicholson Insurance helps people recover faster from financial hardship, by helping to offsetting or covering costs. It also encourages the habit of saving regularly.

Life insurance (or in some countries, “life assurance”) is a contract between an insurer and a policyholder in which the insurer promises to pay a specified beneficiary a sum of money upon the death of the insured. In exchange for a premium, which may be paid periodically or as a single lump sum, the policyholder agrees to be covered by the insurance until their death. The amount of the death benefit is typically equal to the insured’s current age multiplied by the policy’s face value. The death benefit is the primary reason for purchasing life insurance, although the policyholders may also use it to pay estate taxes or other obligations.

There are several different types of life insurance policies available, each with its own advantages and disadvantages. The best life insurance companies offer high financial strength ratings, low customer complaint rates, competitive prices, a variety of policy types, available and included riders, and easy applications.

Simplified issue life insurance, which is sometimes referred to as final expense or burial insurance, is a type of permanent coverage that allows people who would otherwise be denied the opportunity to obtain an affordable policy due to health or lifestyle concerns to qualify for coverage. Typically, no medical exam is required and the only investigation into the applicant’s health is a series of yes/no questions about their past health history and a review of their prescription drug history.

Group life insurance, as its name suggests, provides coverage to a large group of individuals, such as employees of a company or members of a union or association. The underwriting for this type of policy is normally less rigorous than individual policies and focuses on the size, turnover, and financial stability of the group.

Health Insurance

Health insurance is a form of protection against high medical expenses. It is a contract between an insurer and the insured individual or group (such as an employer or community organization). It may be purchased individually, or as part of a group policy through an employer or through a public program such as Medicare, Medicaid or the Children’s Health Insurance Program (CHIP). Private health insurance can be provided through a private company or through the health exchanges established under the Affordable Care Act (ACA). The terms and conditions of a health plan are specified in writing in a member contract or Evidence of Coverage booklet for private coverage or in a national health policy for public coverage.

A health plan usually covers most or all of an insured’s healthcare costs in exchange for monthly premium payments. It also provides caps on out-of-pocket maximums, limiting the amount that an insured is responsible for paying for each health-related expense. In addition, most health plans offer discounts on co-insurance or co-payments for providers in their network and additional benefits for using in-network providers.

Choosing the right health plan for you requires careful consideration of your specific needs and budget. It is important to choose a plan with the broadest scope of coverage possible, as this will minimize your out-of-pocket expenses during claims. It is also important to read and understand your policy documents. Be sure to understand the premium cost vis-à-vis the coverage offered and do not ignore any terms or conditions like exclusions, renewability condition, free-look period or waiting periods.

Property Insurance

Property insurance is a type of liability insurance that covers damage to structures like homes and cars as well as the personal belongings inside them. A basic policy usually includes homeowner’s or renter’s insurance, which provides reimbursement for a home’s structure and its contents in case of theft, fire and some types of weather events. Additional coverages, such as loss of use and personal property replacement value, are often available. Most property insurance policies also include personal liability protection, which reimburses the policyholder for bodily injury or property damage that they or members of their household cause to other people on the property. This is normally included in a homeowners or renters policy and may also be sold separately.

Some property insurance policies are combined with general liability protection in a package known as business owner’s policy (BOP). Others cover both building and personal property and may include environmental coverage for things such as chemical pollution, oil spills or other contamination. Business interruption coverage is typically sold as an endorsement to property insurance and is used to compensate a company for lost revenue due to the need to temporarily close a facility because of damage covered by the policy.

Many property policies provide either actual cash value or replacement cost coverage. The former reimburses the policyholder for a property’s current value after depreciation, while the latter pays to replace the item at its initial purchase price. In some cases, the insurer may choose to pay only for the property’s fair market value in case of a total loss.

Those who need property insurance should compare multiple options before choosing a policy. Look for a company with a good reputation and a customer service record that meets your needs. Make sure that the policy you choose is adequate to cover your entire property and that it includes enough coverage to rebuild your home in the event of a total loss. It is also a good idea to get multiple quotes from different companies, and to review the company’s complaint record before purchasing. If the insurer offers seemingly unbelievable rates, this should be a red flag.

Liability Insurance

Liability insurance covers the costs of defending you or your business in the event that someone sues over injuries or property damage alleged to be your fault. This type of protection is often included in home and auto policies, as well as a variety of commercial insurance packages. For example, general liability (GL) insurance can protect a company against claims alleging that the company caused bodily injury or property damage to people or their possessions. Directors and officers (D&O) coverage can shield a company’s senior management team against lawsuits arising from unlawful acts, erroneous investment decisions, releasing confidential information, conflicts of interest and gross negligence. Umbrella policies offer extra liability protection and generally cost $150 to $350 a year for an extra $1 million in coverage.

Insurance companies evaluate a company’s risk for liability claims based on factors including the history of accidents or incidents, industry risks, state laws and regulations, and the company’s approach to handling and preventing potential hazards. Insurance premiums are also impacted by a company’s financial stability, length of time in business, and its record of loss control efforts. In addition to standard liability insurance, it’s important for businesses to consider errors and omissions (E&O) insurance, which protects against lawsuits over professional services or failure to perform those services up to a specified limit. Also known as malpractice insurance, this is a common policy for lawyers, accountants, architects, engineers and other businesses that provide a service for a fee. This type of policy can cover legal fees, judgments and settlements up to a specified limit in the contract.