Insurance Companies – Living means taking risks. While some of those risks result in trivial losses, others produce substantial personal and pecuniary hardship. While the wiping out of all risk would be wishful thinking, insurance companies provide various mechanisms to protect against, reduce and avoid different types of risks.
In today’s marketplace, Americans may purchase insurance to safeguard against disability, death, illness, natural catastrophes, accidents, liability claims, and other incidents and calamities.
To successfully insure their property, person, and/or life, it is critical for consumers to obtain the right coverage. Wading through a maze of insurance policies, each containing its own restrictions and premiums, might seem like an indomitable task. However, with a few informational guide posts, you will be able to navigate confidently through the ocean of insurance providers.
Types of Insurance Companies
An insurance company falls into one of three categories:
1. Life insurance agency offering life insurance, pension plan services such as 401(k), and annuities;
2. Non-life or general insurance company which sells other forms of insurance; or
3. Reinsurance company which sells insurance to other insurers.
The three types of companies are subject to separate accounting regulations and laws. Life insurance is distinguishable from other forms of insurance in that the coverage it offers is long-term.
The most popular types of life insurance are 1) term life, 2) variable life, 3) universal life, 4) whole life, and 5) cancer care. A general insurance company may be either standard lines or excess lines.
A standard line insurance agency is a mainstream insurer that usually provides protection for businesses, homes and vehicles, among other ‘standard’ items. Its policies tend to be uniform and cookie-cut in nature, and its premiums are generally lower than those of excess line insurance companies.
State law limits the amount that standard line insurance providers may charge for their products and services. Excess lines insurance companies, on the other hand, protect coverage for risks not insured by standard line insurers.
Since they are not subject to the same regulations governing standard insurance companies, they can react in a more expeditious manner and have greater flexibility.
Types of Insurance Agents
Insurance agents may be either independent or captive. A captive agent works for only one company, whereas an independent insurance agent may sell customers policies from a number of different companies.
An independent insurance agent is an employee of an independent insurer which usually has contracts with numerous insurance agencies. The number of contracts varies from one national insurance company to the next.
Insurance brokers are one type of independent insurance agent, in that they have access to dozens of insurance companies. This makes independent insurance brokers well-placed to offer a greater selection of coverage and pricing options.
They search for the optimal insurance policy that matches the client’s personal situation and needs. Insurance brokers are paid by the insurance company, not the client. Consumers may shop for insurance agents by consulting their local chamber of commerce.
Preferably, the insurance brokers or agents should have a professional designation such as Casualty & Property Insurance Underwriters (CPCU) or Certified Insurance Counselors (CIC).
There are several ways that consumers may save money when purchasing insurance:
1. Paying semi-annually or annually;
2. Buying different types of insurance from the same nationwide insurance company;
3. Reducing the likelihood of claims by enrolling in a safe driving course or attaching deadbolt locks; or
4. Availing themselves of group policies available through professional association, religious organizations or alumni clubs.
Types of Insurance Policies
The policies of insurance companies differ in the amount of coverage they provide. Some insure up to a certain dollar amount, while others cover a percentage of loss. Deductibles are required by some, while others exclude specific types of damage.
The typical nationwide insurance company offers the following products for individuals and families:
1. Property and casualty insurance Recreational vehicle and auto insurance (which usually offer liability, medical and property coverage) Motorcycle insurance Home and property insurance (homeowners insurance, renters insurance, condos and tenants insurance, condo insurance, mortgage insurance, title insurance, excess liability insurance, earthquake insurance, excess flood insurance, mortgage indemnity insurance)
– Private collections insurance (for pricey household items)
– Boat insurance
– Identity theft insurance
– Pleasure craft insurance (i.e. covering yachts and other high-end watercraft)
– Private aviation insurance
2. High net worth insurance (protecting affluent clientele against robbery, kidnapping and other crimes or natural disasters)
3. Kidnap, ransom and extortion insurance
4. Pet insurance
5. Credit insurance, which is offered in connection with a credit account (i.e. mortgage insurance)
6. Health insurance
– Hospitalization insurance
– Sickness insurance
– Personal accident insurance
– Vision insurance
– Dental insurance
7. Travel insurance (flight insurance, cruise insurance)
Types of Business Insurance
A general insurance company typically provides the following types of business insurance:
1. Property insurance
– Offshore physical damage insurance
– Condos and tenants insurance
– Contractors’ equipment insurance
2. Workers’ compensation
3. Professional liability insurance
4. Commercial auto insurance
5. Executive liability (directors and officers liability)
6. Primary casualty
– Sports liability insurance
– General liability insurance
– Contractors liability insurance
– Liquor legal liability insurance
7. Occupational accident and health insurance
8. Environmental liability insurance
9. Financial loss insurance
10. Aviation insurance
11. Political risk insurance
12. Crop insurance
13. International coverage
– Marine liability insurance
– Cargo insurance
Other Products Offered by Insurance Companies
Many insurance companies also offer the following financial products and services:
1. Investment services (i.e. mutual funds, real estate investment, private equity investment, hedge funds investment);
2. Annuities, which are a form of life insurance that is interest-bearing and in which periodic payments are made to policyholders (i.e. variable annuities, fixed annuities);
3. Retirement services;
4. Pension plan services;
5. Credit services and loans (i.e. commercial mortgages, business credit cards)