Insurance often faces questioning and skepticism, with some labeling it a scam. However, this perception often arises from bad practices with the insurance industry and their core principle as relates risks management.
Fact in Insurance
Insurance is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurer. In exchange for this protection, the insured person or entity agrees to pay premiums to the insurer.
An insurance company can be either a life insurance company or a property and casualty (P&C) insurance company. These companies are sometimes called reinsurers because they help other insurance companies reduce their risks, thus protecting them from insolvency due to large claims.
Insurance facts are:
- Insurance covers protection against financial loss and unexpected events like storms, accidents, illnesses, and other natural disasters.
- Comes with a wide range of coverage like health, life, travel, and motor insurance
- Some coverage like auto insurance is Mandatory by law depending on your country.
- An insurance premium is based on risk profiles like age, health, driving history and so on.
- Claim denial can occur if the incident is not covered under the policy you purchased or if there is a breach in the terms and conditions.
Model of Insurance
Insurance operates on the model of pooling resources of many customers together to cover the losses of a few, based on probability and statistical data.
Insurance Fiction
All insurance is a scam. This fiction arises from instances of fraudulent activities or dissatisfaction with claim denials by an insurance company. However, these are not indicative of the insurance industry as a whole but rather the outcome of misunderstanding policy terms.
Therefore, all insurance is not a scam. The following is a list of insurance fiction:
- All insurance is a scam: All insurance is not a scam. Just do your research well and go for reputable companies.
- Standard Home Insurance Covers All Natural Disasters: Standard home policies do not cover some separate policies that are needed.
- Older People Always Pay More for Life Insurance: While age can affect life insurance costs, it doesn’t mean old people pay more. There are other factors like overall health and lifestyle choices which are also significant.
- Small Cars Are Cheaper to Insure: Not necessarily in real-life situations; some small cars may cost more to insure because of the higher injury risk or repair costs.
- Auto Insurance covers Personal Belongings in Your Car: Any personal items stolen from your car are not covered by auto insurance but by homeowner’s or renter’s insurance. So note the difference and purchase the accurate insurance policy needed.
The Reality In Insurance
Insurance is legit and the legitimacy does not negate the presence of scams within the industry. It’s important you conduct thorough research, understand different policy details, and how to make your claims. Register with reputable insurers to ensure you are adequately protected and informed.
In conclusion, while insurance is a legitimate means of protection against financial loss, you should be informed, smart, and vigilant to distinguish genuine coverage from potential scams in the industry.