Most people in the world own insurance. Insurance take a lot of forms such as medical insurance, automobile insurance, and the most common of them all: the life insurance. We, as human beings, face risks every day. We are prone to unexpected events such as accidents, theft, and loss. We may not be able to completely get rid of the risks, but we are able to prepare for it through our insurance. The right kind of insurance is important in the management of your financial plan.

While most of us possess insurance, many don’t know the full details of the insurance and how it works. Before going into the kinds of insurance and how it works, let’s get the basics down first.

What is Insurance?

Insurance is something that protects the holder from risks such as potential loss or financial hardship at a tolerable rate. It is a form of risk-management. In insurance, the potential cost of loss is transferred to another entity in exchange for monetary compensation. This monetary compensation is known as the premium.

Insurance covers significant potential losses. This means that the loss must be significant or crucial to the insured otherwise it shall not be considered as something that will hurt the insured critically. It is typically paid monthly or depending on the terms of the insurance.

The most common type of insurance is the life insurance. The life insurance protects the insured from the risk of injuries and death depending on the terms of the insurance. An example of this is if you are the one who works for you family and you provide the income for their needs. You can see the importance of a life insurance to someone that encounters a misfortune and will not be able to carry out his routine role. If the breadwinner is unexpectedly injured or die and won’t be able to provide for his family no longer, the life insurance shall cover the cost agreed upon for the risk fulfilled.

So if you want to protect yourself and everyone that you care about, it makes sense to get insurance to protect from the unexpected financial hardships. Insurance have many perks such as coverage of income in case of death, debt repayment, protection against lawsuits, coverage in the case of disability, protection against natural disasters, theft, and fire, coverage of unexpected health expenses, and a lot more.