Types of Insurance

September 28, 2009

Insurance is one of the best risk management strategies that one can follow. Insurance companies will cover the risk of loss in exchange for a fee, called a premium. When the risk is taken over by an insurance company it gets spread over a group of people who have taken similar policies. The premiums collected from the group of people will go towards paying any claims. This is how the risk is spread and the individual gets the advantage of having different types of risk covered in his life.


The different types of risks that are covered, will determine the various types of insurance. Depending on the need, the individual will choose one or more of these types of insurance. There are certain insurances which are mandatory by the state like auto insurance and so on, and even in these the person can choose the extent of coverage and the type.

Wherever risk is involved companies have developed a system insurance to cover it. Some of the most common types of Insurance commercially available today are Life insurance, Health insurance, Auto insurance, Property insurance, Liability insurance, and Credit Insurance.

Life Insurance

One of the most common type of insurance, and it pays on the death of a family member. This insurance covers the risk of sudden financial difficulty due to the demise of a member of the family. This type of insurance has two types. One is with a very low premium, and the company only pays the sum assured on the demise of the person on whose name the policy is taken. The other type also includes a saving aspect to it and the premium is higher. In this the premium collected is returned with a certain interest after the period of policy is over. In certain life insurance policies, there is a disability clause also, whereby the person can claim the amount if he is rendered permanently disabled by an accident or disease.

Auto Insurance

This type of insurance covers the risk of expenditure for the vehicle and bodily injury in the event of a road accident. In almost all states in America, this form of insurance is mandatory. There are many different types of clauses in auto insurance and one has to go through the policy carefully before purchase. You also need to know your requirements, on how much coverage you need for your car and for the medical expenses after the accident. There is also clauses covering third party liabilities, which cover the other people involved in the accident. Also you can take coverage for expenses in case of litigation, and all the other legal formalities.

Property Insurance

This insurance covers the risk of loss of any kind of property. It can be a house, appliances, jewelery, machinery, commercial premises or buildings, rented premises and any kind of other tangible commodity which has a commercial value. The damage to these things could be from natural disasters like floods, earthquakes and so on, vandalism, fraud, fire, robbery and terrorism. Some of the house insurance policies are comprehensive and include all the things in the house as well.

Liability Insurance

This type of insurance covers the risk of losses incurred due to the negligence of the insured. It will protect the insured from expenses arising out of indemnification clauses and other legal claims. A third party clause in an auto insurance is a liability insurance as it covers the legal expenses in the event of litigation. Professional Indemnity Insurance is a liability insurance, where a professional individual like a doctor, home inspector, realtor, notaries and so on, are protected from suits of malpractice and other kinds of unintentional negligences while performing their professional duties.

Credit Insurance

This insurance covers the risk of people who give credit, in case the borrower does not pay the money back. The non-payment could be due to different reasons like death, disability, or loss of job of the borrower. In such cases this insurance will reimburse the money to the lender.

Travel Insurance

This form of insurance is gaining popularity as more people are travelling from around the world for business as well as pleasure. This insurance covers the risk of loss of luggage and any medical emergency while travelling. This insurance is especially useful while travelling to a foreign country, as one has no contacts or much resources to meet any unpleasant eventualities.


All the types of Insurance stated above have many varieties in their class and also will differ according to the laws of a country. Also the same type of policy might have different clauses and benefits according to different insurance companies.

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Written by Uncle Sam · Filed Under Insurance 

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