INSU 330 Introduction to Insurance

What dose Insurance Mean ??  We all buy different types of insurance such as auto, medical, liability, disability or life insurance BUT many of us don’t understand what it is and how it works.  In this course we will review the basics of insurance and how it works, then take you through the main types of insurance out there.

 Insurance is a form of risk management in which the insured transfers the cost of potential loss to the insurer in exchange for monetary compensation known as premium.  What do these terms mean ?  Insured  Insurer  Loss  Premium

Insurance Terminology Insured : A person who is insured by an insurance policy. Insurer : A person or company that accepts the risk of loss and compensates the insured in the event of loss in exchange for a premium. Loss: Damage or destruction to something of value. Premium: The cost of insurance which is paid monthly or yearly by the insured.

The Potential Losses must be “Significant” The insurance allows individuals, businesses and other entities to protect themselves against “significant potential losses” and financial hardship, because if the potential loss is small, then it dose not make sense to pay a premium to protect against the loss.  Example 1: You would not pay a monthly premium to protect against a $50 loss, because it would not be considered a financial hardship for most.

 Example 2: If you are the primary breadwinner in your home,the loss of income that your family would experience because of your premature death is considered as a significant loss and hardship. If you die it is a significant loss and financial hardship for your family to replace your income BUT If you buy a life insurance for yourself, the insurance company will replace your income in exchange for the monthly premiums you pay.

“If I die why do I need money ?” you don’t … but your family, your business or your favorite charity might need.