Insurance

Insurance is a financial product that transfers risk from an individual or business to an insurance company in exchange for premiums. An insurance policy is a legally binding contract that specifies coverage terms, exclusions, and claim procedures.

Insurance companies calculate premiums using actuarial data on risks such as age, location, health history, and asset values. Auto insurance covers property damage and liability costs caused by traffic accidents, with minimum state requirements ranging from $10,000 (Florida) to $50,000 (Alaska) for bodily injury per accident.

Health insurance pays for medical expenses like hospital stays, surgeries, and prescriptions; the average annual premium for employer-sponsored family coverage was $22,463 in 2022 (KFF). Life insurance provides beneficiaries with a lump sum payout after the insured’s death; term policies typically offer lower premiums than whole life products.

Homeowners insurance protects against losses from fire, theft, and natural disasters, with most mortgage lenders requiring coverage at least equal to the loan balance. Renters insurance compensates tenants for personal property loss and liability claims; the average annual cost was $173 in 2021 (NAIC).

Commercial insurance policies shield businesses from lawsuits, property damage, employee injuries, or professional errors; popular examples include general liability and workers’ compensation. Claims processing involves submitting documentation such as police reports or repair estimates for insurer evaluation before payment approval, per the Insurance Information Database.

Insurers may deny claims due to policy exclusions, missed premium payments, or misrepresentation of information during application.