Personal and Professional Insurance

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Personal and Professional Insurance

People deserve to be protected when disaster strikes, it is best to be prepared. Nobody can predict the future but smart people plan ahead for it. Insurance is a form of risk management in which the insured transfers the cost of potential loss to another entity in exchange for monetary compensation known as premium. It is a tool which aids to reduces the cost of loss caused by variety of risk.

Why insurance is important

Insurance is important because it protects a person from extreme financial loss due to an unfortunate emergency, accident or negative unforeseen event. Insurance allows individuals, businesses and other entities to protect themselves against significant potential losses and financial hardship at a reasonably affordable rate. Everyone who wants to protect themselves or someone else against financial hardship should consider insurance. There are many different kinds of insurance, some of which cover a person and some of which cover businesses and other entities.

1. Personal Insurance

Personal insurance is all about providing cover for your life and family’s life. Types of personal insurance includes:

a. Life insurance

b. Total and permanent disability

c. Critical illness

d. Income protection

a. Life insurance

Life insurance is a great tool that will help your family in meeting their critical needs and lead a comfortable life even when you are not around. Life insurance helps by paying a cash lump sum if you die. The lump sum is generally not taxable and is payable to your estate or alternatively to the beneficiaries you list in your policy and can be used for any purpose. In return, you make periodic payments, called premiums. The premium amount is based on factors such as your age, gender, medical history, and the dollar amount of life insurance you purchase.

In the event of passing, life insurance provides money directly to beneficiaries. They can use the money for:

  • Making up for your lost income

  • Funding a child’s education

  • Paying off household debt

  • Paying for your funeral and other related expenses

Certain types of life insurance may provide benefits for you and your family while you’re still living. For example, permanent life insurance offers a cash value component, which can be put to good use during your lifetime.

b. Total & Permanent Disability Insurance

Unfortunately, accidents do happen. And while you may survive, what if you can never work again? If an accident or illness leaves you unable to earn an income in the future, Total and Permanent Disability Insurance will pay you a lump sum to help relieve the financial pressure. It can also be useful for people who are not in the workforce and are unable to take out Income Protection Insurance. It can help you maintain your current lifestyle and help protect you and your family from going into serious debt.

c. Critical Illness Insurance

Critical illness is a serious health condition that has a debilitating effect on an individual’s lifestyle which requires a considerable amount of money towards treatment. It may also lead to loss of income due to inability to work. This specialized insurance provides a lump-sum; tax-free payment should a policyholder suffer from certain specific critical condition. The chance that major illness may strike you is very real. The policyholder is diagnosed of a health related condition of a serious nature such as a heart attack, stroke, paralysis, malignant cancer, coronary artery bypass surgery, major organ transplant (heart, lung, liver, pancreas) and kidney failure.

d. Income Protection Insurance

No one likes to think that something bad will happen to them. But each year close to a million people find themselves unable to work due to a serious illness or injury. Income Protection Insurance provides a monthly payment if you are unable to work due to sickness or injury. It helps to protect from financial disaster. It is particularly important if you have obligations such as a mortgage or other debts that you would struggle to repay without your income. It is also important for self-employed people who do not have the protection of an employer to provide any sickness benefits.

2. Professional Insurance

It protects a company’s assets and pays for obligations – medical costs, for example –incurred if someone gets hurt on your property or when there are property damages or injuries caused by you or your employees.

If you own a business, you may become liable for damages to another property or person caused by your business. You could also face claims of negligence or breach of duty in providing a professional service or advice. The threat of potential claims and litigation is very real in today’s business environment and can potentially bankrupt businesses, small or large. You may think “it will never happen to me”, but legal action often comes from an unforeseen event. Liability and indemnity are two types of insurance that protect your business against legal claims. Making sure you have the right cover for liability and indemnity is vital to your business.

a. Public liability insurance protects you and your business against the financial risk of being found liable for personal injury, property damage and economic loss.

b. Professional indemnity insurance protects you and your business against claims for alleged negligence or breach of duty arising from an act, error or omission in the performance of professional services.

Some insurance terminologies that we should know:

  • Actuary is an insurance specialist who calculates rates and other statistics.

  • Bound is generally the accepted contract paper of instructions. The process of being bound is called the binding process.

  • Insurer is the person or company that accepts the risk of loss and compensates the insured in the event of loss in exchange for a premium or payment.

  • Insured is the person or company transferring the risk of loss to a third party through a contractual agreement. This person or entity who will be compensated for loss by an insurer under the terms of the insurance contract.

  • Insurance Rider/ Endorsement is an attachment to an insurance policy that alters the policy’s coverage or terms.

  • Insurance Umbrella Policy may be purchased to cover losses above the limit of an underlying policy or policies.

  • Insurable interest is important as without it insurers will not cover the loss. It is worth noting that for property insurance policies, an insurable interest must exist during the underwriting process and at time of loss.

  • Premium is a periodic payment you make in return for your insurance coverage, which can be in the form of annual, semi-annual, quarterly or monthly payments.

  • Beneficiary is a person who receives the death benefit, or payout, upon the death of the insured.

  • Cash value is a feature of some permanent life insurance policies that you could potentially withdraw or borrow from.

  • Deductible is the amount that you must pay out of your own pocket before the insurance company will begin paying towards any covered expenses.

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