What types of insurance exist and how do they work?

There are more than 100 types of insurance products, this text describes the most popular of them.

What kind of insurance is there?

Insurance is usually divided into two main areas – compulsory and voluntary. Compulsory insurance is required for all citizens.

There are many more types of voluntary insurance – services that can be used at will. 

You can insure:

  • life, health, ability to work;
  • various property that the policyholder owns, uses or disposes of;
  • liability to third parties to whom it may cause damage, for example, in an accident.

Popular types of insurance

Life insurance

In terms of the number of premiums collected, life insurance is the leader among all types of insurance. It is divided into several types. 

Thus, with risk insurance, the policyholder enters into an agreement with the insurance company, makes a contribution or several, and in the event of an insured event – in the classic case of the death of the insured – his relatives receive the money. 

You can expand your insurance to include the risk of illness and injury. In such a mixed insurance, you can choose the amount of payment, a list of adverse events (disability, injuries or fatal diseases), as well as the insurance period. Then the insured person will be the beneficiary. However, sometimes such insurance is concluded in favor of the bank, for example, with a mortgage loan. If something happens to the borrower, the insurance will pay off the mortgage and the relatives will not have to pay the debts.

Savings insurance, which showed the largest increase in premiums in 2022 among other life insurance programs, is a combination of insurance and savings. 

If an insured event (death) occurs under such a contract, the beneficiary will receive the payment; if not, then at the end of the contract, the policyholder will receive his savings and a small fixed return of 1-3%. Sometimes the contract provides for regular payments throughout its term, rather than a one-time payment at its end. 

Property insurance 

You can insure any property that the policyholder owns, uses or disposes of: be it a house, a rented apartment (although the owner will receive the payment), a washing machine in it, or even a cat. 

Such a contract can be concluded for a period of 1 year, and the insured amount cannot exceed its actual value at the time of concluding the contract. Even if the property is insured by two companies, then they will simply divide the payment among themselves. 

There are two approaches to property insurance: the exclusion method (from all risks, except those listed) and the inclusion method (when all risks are named). Most often, property is insured against fire, theft or flooding (by the way, flooding most often refers to natural disasters, not flooding), but others can be included in the contract – for example, the risk of falling aircraft. 

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