What Is Insurance?

This is a question that many would regard as very basic and fundamental. Many would assume that everyone knows exactly what insurance is. Let us assume for a moment that not everyone does know this for sure and then based on this assumption, we can go ahead to explain as briefly and simply as we can.
Insurance is a transaction between two parties one referred to as the insurer (insurance companies) and the other referred to as the insured (you and I). The insurance company offers to provide the insured with an agreed amount of cover so long as the insured agrees to make certain payments based on an agreed upon rates and time. This payment is called your premium.

What Do We Mean By Cover?

Cover is basically an assurance that some compensation would be given to the insured to a certain extent when or if certain agreed upon events occur. An example is auto insurance. When you get a collision policy from your insurer, what you are simply entering into is an agreement that whenever your car hits something, your insurance company would pay for the repairs of the car to the extent of your coverage.

What Determines The Amount I Get Settled With?

The amount you are settled with is determined by you when you buy your policy. Which is why you would always hear references to “The amount of cover bought.” The amount of cover you buy would determine what your premium would be. The more you want to be settled with, the more premium you should be ready to pay.

What Happens If I Never Need To Make A Claim?

This is one area that has many people worried. depending on the policy in question, when you don’t need to make a claim maybe because the peril for which you are covered never occurred, you simply lose your money for that year, as the insurance company took the risk of covering you in case the peril occurred and then they would have compensated you for the loss which could run to 10 times or even more than the premium they collected. People need to understand spending a fraction of your income to protect your property, individual is being smart and prudent about protecting them financially when accident occur.

Difference between Agent and Broker

The line that separates the difference between an agent and broker is a blurred one. Both an agent and a broker have the ability to solicit insurance quotes that will adequately protect your business, but the way they go about it is a little different.

Agent

An agent is a person who has entered into an ‘agency contract’ with an insurance company for the purpose of selling insurance for that company. An agent is not an employee of the insurance company, but rather an independent contractor. The agent, unlike a broker, has the authority to bind coverage (legally obligate the insurance company to provide coverage according to the terms and conditions as bound).
An agent that hires more than one person to service their policyholders is called an agency. An agency consists of two or more people, usually a combination of licensed individuals along with support staff.

Broker

A broker is a person or firm that has permission to seek insurance quotations for an insured (client) or prospective client. A broker is not an insurance company employee. As a representative for the insured, brokers will approach several insurance companies in an attempt provide quotations and coverage to adequately insure the client’s exposures.

The broker will ascertain the client’s needs, gather information and submit the information to several insurance companies. Brokers do not have the authority to bind coverage. They present the information and if the insurance company agrees, the insurance company will bind the coverage.