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9 Various Types of Insurance Defined You Should Know

Insurance is defined as a contract. The contract is represented by something called policy. The contract is about an entity or individual who will receive reimbursement against losses or financial protection from the insurance company.

The insurance company will pool the risks of the clients in order to make the payments become much more affordable for the insured ones. Insurance policy is used in order to protect against the financial losses’ risk, both small and big.

9 Types of Insurance Defined, Difference, and Explanation

Various Types of Insurance Defined

Any quantified risk can be insured. The insurance policy is going to set out the details of what perils will be covered by the policy and what perils are not covered by the company. You are about to see a list of various types of insurance you will find out there.

1. Vehicle insurance

This type of insurance is designed to protect the holder of an insurance policy against any financial loss in case there is an accident that is involving the vehicle owned by the policyholder, such as traffic collisions. Usually, this insurance policy is covering these components:

  • Property coverage for any theft of or damage to the car.
  • Liability coverage for policy holder’s legal responsibility to the others for property damage or bodily injury.
  • Medical coverage for various medical costs such as rehabilitation, treating injuries, and sometimes funeral expenses and lost wages.

2. Health insurance

Health insurance policies are covering medical treatments costs. Dental insurances are like medical insurances, they protect the policyholders from various dental treatment costs. In so many developed countries, the entire citizens receive coverage for health from the governments.

The coverage is paid through taxation. But in many countries, health insurance usually is a part of the employer’s benefits.

3. Income protection insurance

In some countries, employers’ liability or workers’ compensation insurance is compulsory. Disability insurance is going to provide financial support in case the policyholder becomes unable to work that is caused by disabling injury or illness.

This insurance provides monthly support in order to help the policyholder to pay some obligations like credit cards and mortgage loans. Long-term and short-term disability insurance is defined as insurance for individuals.

4. Casualty insurance

This insurance is going to insure against accidents but not necessarily tied to a specific property. This is a broad insurance spectrum so that it can be classified into some other insurance types such as auto insurance, liability insurance, and workers compensation. Some examples of casualty insurance are:

a. Ransom and kidnap insurance

This insurance is designed to protect corporations and individuals operating in areas around the world that have high risk against the perils of extortion, kidnap hijacking, and wrongful detention.

b. Crime insurance

This is another form of casualty insurance. This insurance will cover the holder of the insurance policy against losses that arise from any criminal acts of the third parties.

c. Terrorism insurance

This insurance is going to provide protection against any damage or loss that is caused by terrorist activities.

d. Political risk insurance

This insurance is also a form of casualty insurance policy. This insurance can be used by businesses that operate in countries where the risk that political conditions like revolution can result in a loss.

5. Property insurance defined

Property insurance is providing protection against risks to property, like weather damage, theft, or even fire. This can also include specialized insurance forms such as flood insurance, fire insurance, home insurance, earthquake insurance, boiler insurance, or inland marine insurance.

Below are various types of property insurance policies:

a. Renters’ insurance

This insurance is also known as tenants’ insurance. It is an insurance policy that is providing several benefits of insurance for homeowners, but doesn’t include coverage for structure or dwelling with the exception of some small alterations that the tenant makes to the structure.

b. Volcano insurance

Volcano insurance is defined as specialized property insurance that is protecting against damage that is specifically caused by volcanic eruptions.

c. Windstorm insurance

This is insurance that is covering any property damage that is caused by the wind events like hurricanes.

d. Landlord insurance

Landlord insurance is covering commercial or residential property that is being rented to some tenants. This insurance policy also covers the liability of the landlord for the property’s occupants.

e. Crop insurance

Crop insurance can be purchased by the farmers in order to manage or reduce various risks that are related to growing crops. The risks that include crop damage or loss can be caused by drought, weather, hail, pests, diseases, or frost damage.

6. Credit insurance defined

Credit insurance is going to repay all or some of the loan when the borrower goes insolvent. Some types of credit insurance are:

a. Mortgage insurance

This insurance will insure the lender against any default by the borrower.

b. Trade credit insurance

This one is also known as business insurance. This insurance will cover the insured’s accounts receivable. The policy is going to pay the policyholder for the covered accounts receivable if the debtor defaults on the payment.

c. Collateral protection insurance

This insurance will ensure the property, especially vehicles that are held as collateral for loans that are made by the lending institutions.

7. Cyberattack insurance

Cyberattack insurance is a product of business line insurance. This insurance is designed to provide coverage, especially to corporations. The insurance is going to protect from internet-based risks, like the risks that are related to information privacy, IT infrastructure, and information governance liability.

8. Burial insurance

This is an extremely old life insurance type that is paid out upon the death in order to cover some final expenses like the funeral cost. This insurance was introduced by the Romans and Greeks when they organized some guilds that are called benevolent societies.

9. Life insurance

Life insurance is providing a monetary benefit to the family of the decedent or to the other people that are designated beneficiaries. This insurance may provide for income to the family of the insured person, funeral expenses, burial expenses, and many more final expenses.

Insurance is defined as something like a contract between the holder of the policy and the company that is providing insurance. There are so many types of insurance that you can find out there. These nine are only examples of many insurance types.

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