What every person needs to know about insurance

In every life, unpleasant situations often occur in which business, property or health can suffer. Of course, it is possible to try to cope with such situations independently, but this does not always work, because sometimes it is not possible to do the resulting injury or even death, and sometimes the degree of financial damage caused by the individual budget. Especially in order to combine the efforts of many people in the fight against unforeseen situations, insurance funds are created, the funds of which are used to quickly compensate for financial costs.

The insurance system exists in every developed country. And every citizen can find an insurance company for himself, where he can draw up an insurance policy in case of possible troubles in his life. However, some insurance companies may offer you insurance not only against a real threat, but also from an event whose probability is unlikely. In addition, the amount of insurance premiums and the size of insurance payments in different companies can vary greatly and it is important to choose an insurance company that provides optimal conditions in your situation. Therefore, owning knowledge in the field of insurance is so important and the importance of this knowledge increases every year, along with an increase in the pace and intensity of our lives.

What is insurance

Insurance is the relationship of protecting the property interests of citizens at the expense of cash in cases of occurrence of certain events, called insured events. In simple terms, this means that you unite with other people and agree with them about the amount of compensation in the event of any predetermined situations. If one of these situations occurs, then you receive monetary compensation from the general fund, which is formed from contributions from all parties to the general contract.

The insurance company acts as an intermediary, which provides guarantees for its customers, and at the same time, manages the assets of the general insurance fund. It should be understood that insurance is a purely financial relationship, that is, all insurance cases are evaluated in monetary terms and do not guarantee protection against unforeseen situations for you, but only against their consequences.

Each insurance company performs three functions:

  • Formation of the insurance fund , from which payments are made to the victims of the insured event to customers. One of the most difficult tasks of the insurance company. It is important to look for new customers who would insure and replenish the general fund, and it is also important to skillfully manage the insurance fund in order to always be able to fulfill their obligations to customers in situations when an insured event occurs. Temporarily free insurance funds are most often invested in banks, commercial enterprises, real estate, of course, with minimal financial risks.
  • Indemnification to the injured clients of the insurance company. Every insured person, especially when it comes to life and health insurance, it is important to feel guaranteed that the insurance company will fulfill its obligations under any conditions and in a timely manner.
  • Minimizing potential damage and preventing insurance claims . Clients of the insurance company, as a rule, are encouraged to take care of the insured property or their own health. Most often, the insurance company acts on the client at the expense of the terms of the contract, where situations are clearly defined in which the insurance payment does not occur.

All three functions of insurance are very strictly controlled and regulated by the state in order to protect the interests of citizens and prevent possible fraud. Insurance activities are controlled almost as strictly as banking, due to the large sums of money accumulated in the accounts of joint insurance funds.

Why do you need insurance

In Russia, it is traditionally widely believed that insurance is usually wasted money. In practice, insurance can be beneficial not only for an insurance company that benefits from free funds of clients, but also for clients themselves upon the occurrence of insured events. Relatively small insurance premiums ensure the tranquility of the insured person, as well as full or partial compensation for possible damage. Contributions and payments are calculated using very complex formulas that take into account the interests of both the insurance company and its clients.

Currently, you can insure almost everything – from any property to your own life. Having entered into an insurance contract, you will feel confident and will not worry because of a hypothetically possible unpleasant situation that may not occur. But even if the insured event happens to you, you will receive guaranteed financial support to eliminate its consequences.

Types of insurance

Since insurance is a very complex area, affecting almost all aspects of life, there are a great many different classifications and divisions of types of insurance. It is sometimes difficult to understand them. Russian and foreign classifications based on the interests of the insured person can be used or, on the contrary, insurance companies using the subject of insurance or the term of the contract as the basis. In order not to get confused in all this diversity, the types of insurance are regulated by law and have clear differences from each other on the basis of the Civil Code of the Russian Federation.

In total, Russian legislation identifies 3 types of insurance for individuals on the basis of the insured object:

  • Property As is obvious from the name of this type of insurance, its main difference is that property is insured, and, not only real objects, but also financial risks can be insured. For example, lost income, if it was due to the insured event. The amount of the payment and the situations in which it is made are clearly stipulated in the insurance contract.
  • Personal. This type of insurance is limited to contracts that insure the health and life of the client. Personal insurance allows not only a one-time payment of compensation, but also regular payments after the occurrence of an insured event, for example, disability insurance often provides for a monthly payment to the client’s account, rather than a one-time payment. As a subtype of personal insurance, there are:
    • – insurance against accidents – payment occurs in case of unforeseen harm to health;
    • – medical insurance, including a separate subtype of medical insurance – insurance against diseases and accidents;
    • – life insurance – provides for payments in case of death;
    • – pension insurance – payment of an additional pension;
    • – cumulative insurance – when a customer makes insurance premiums and then receives payments when a certain age is reached.
  • Liability insurance guarantees payment to a third party as a result of damage caused by actions, or vice versa – inaction, the insured person. A classic example is liability insurance, when an insurance company pays for repairs to a car that has got into an accident due to the fault of its client. Liability insurance is one of the most common types of insurance, especially in demand in the field of transport and manufacturing.

Voluntary and compulsory insurance

In addition, the Civil Code defines and makes the distinction between voluntary and compulsory insurance. In the first case, the insurance contract is concluded only on the initiative and, if desired, of the citizen, and in the second, it is his duty under certain conditions. For example, compulsory insurance in Russia is subject to civil liability of car owners.

This means that every car owner is obliged to insure his vehicle in case of an accident before driving onto the road, and contributions to the health insurance fund are automatically deducted from the wages of every working citizen. But in the event of an accident or illness, every citizen can count on mandatory compensation for the damage caused. Also obligatory are contributions to health insurance.

With compulsory insurance, everything is simple – the law must be observed and all citizens falling under its action are obliged to be insured, but what to do with voluntary, non-compulsory insurance? In what situations is it necessary to insure? 

It is advisable to enter into a voluntary insurance contract if you:

  1. You have expensive property that may suffer. For example, you purchased a new car or apartment, expensive furniture or appliances. If you get into an accident, your neighbors will flood your apartment or furniture, and the equipment will suffer as a result of a short circuit, the damage may be quite large. And here it is advisable to insure your property by paying a relatively small insurance premium for the opportunity to fully recover possible financial losses.
  2. Your life is associated with high risks to health or life , or you just want to provide financial support for your loved ones with possible disability or death. In this case, the insurance company will be able to pay for your treatment, time of disability or transfer funds to the account of your loved ones in case of death.
  3. You are going on a trip . Travel insurance is becoming an increasingly common measure when preparing a trip. Agree that on the way, in an unusual situation, the likelihood of an unforeseen situation is much higher than when you live at home. In addition, during travel, medical insurance is much more important, since the probability of serious consequences of a disease is higher.
  4. You take a significant amount of credit from a bank , while having only one source of income. In such a situation, it makes sense to insure yourself against the possible loss of this source so that the insurance company assumes the obligation to pay monthly installments.

Thus, having understood in detail the issues of health, life and property insurance, you will be able to provide for yourself or your loved ones the opportunity to receive adequate compensation in case of any trouble. Of course, it will be much better if no serious incidents happen in your life, but it is important to remember that no one is insured against them. 

At the same time, knowledge in the insurance field will allow you not to overpay when you make insurance, insure only against threats that are real to you, and also not become a victim of insurance scams. 

Author: Jackson

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