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Types
of Insurance
There are a number of different types of insurance:
Automobile
insurance, also known as Auto insurance, Car insurance and in the UK
as Motor insurance, is probably the most common form of insurance and
may cover both legal liability claims against the driver and loss of
or damage to the vehicle itself.
Property insurance provides protection against risks to property, such
as fire, theft or weather damage. This includes specialized forms of
insurance such as fire insurance, flood insurance, earthquake insurance,
home insurance or boiler insurance.
Casualty insurance insures against accidents, not necessarily tied to
any specific piece of property.
Liability insurance covers legal claims against the insured. For example,
a doctor may purchase insurance to cover any legal claims against him
if he were to make a mistake in treating a patient.
Financial loss insurance protects individuals and companies against
various financial risks. For example, a business might purchase cover
to protect it from loss of sales if a fire in a factory prevented it
from carrying out its business for a time. Insurance might also cover
failure of a creditor to pay money it owes to the insured. Fidelity
bonds and surety bonds are included in this category.
Title insurance provides a guarantee on research done on public records
affecting title to real property, usually in conjunction with a search
done at the time of a real estate transaction, such as a sale, or a
mortgage.
Health insurance covers medical bills incurred because of sickness or
accidents.
Life insurance provides a benefit to a decedent's family or other designated
beneficiary, usually to make up for their loss of his or her income.
Annuities provide a stream of payments and are generally classified
as insurance because they are issued by insurance companies and regulated
as insurance. Annuities and pensions that pay a benefit for life are
sometimes regarded as insurance against the possibility that a retiree
will outlive his or her financial resources. In that sense, they are
the opposite of life insurance.
Credit insurance pays some or all of a loan back when certain things
happen to the borrower like unemployment, disability, or death.
Political risk insurance can be taken out by businesses with operations
in countries in which there is a risk that revolution or other political
conditions will result in a loss
A single policy may cover risks in one or more of the above categories.
For example, car insurance would typically cover both property risk
(covering the risk of theft or damage to the car) and liability risk
(covering legal claims from say, causing an accident). A homeowner's
insurance policy in the US typically includes property insurance covering
damage to the home and the owner's belongings, liability insurance covering
certain legal claims against the owner, and even a small amount of health
insurance for medical expenses of guests who are injured on the owner's
property.
Potential
sources of risk that may give rise to claims are known as perils. Examples
of perils might be fire, theft, earthquake, hurricane and many other
potential risks. An insurance policy will set out in details which perils
are covered by the policy and which are not.
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