Insurance

As defined by Wikipedia, insurance is "the equitable transfer of the risk of a loss from one entity to another, in exchange for a premium". Insurance is a type of risk management. Quite simply; Insurance protects owners by paying the costs if and when damage occurs to their insured property.


The History of Insurance



Where did insurance come from? All through history there had to be protection against loss of goods. According to research done by a website called the historyof.net, it is said that back in 2100 B.C, the Code of Hammurabi was considered the first documented insurance policy. Back then, trading of goods required extensive travel to sell many goods in various locations. Transporting goods was a risk. Those that owned the goods needed some type of "insurance" or assurance that the goods would arrive safely and if the goods were damaged the owners would be compensated somehow for their loss. The traders who owned the goods would hire someone to transport the goods. Before the transport the owners arranged negotiation of a loan between parties for protection.



The Greeks created the same types of loans to protect their commerce transported by sea. Those that transported goods by caravan or by ship faced potential dangers of something happening, such as bad weather, or robbery that would cause loss or damage to the goods being transported. The Romans were the first known to create burial insurance to help loved ones of the deceased in paying burial expenses.



The first true insurance contract was signed in Genoa in 1347. From there the idea of insurance continued to develop as society developed. In 1688 the first insurance company was formed, it was called Lloyds of London. It began in a coffee house, which was the common location where people would meet to work out the details of their business. In Europe the shipping of cargo was common; the shippers needed a way to protect their cargo so they insured it.



As commerce and industry grew, risks increased and the need for insurance grew. The idea of insurance as protection of goods was a benefit to merchants. It was also a profitable business opportunity. This idea of protecting goods with contracts fire balled. This idea of protection gave people peace of mind. Companies all over were identifying needs for insurance. In the 1800's the idea of classifying risks was developed. Risks that are familiar to us today include: Fire life health, flood. And society developed the potential risks grew and this increased the business of insurance to protect against these risks.



The first insurance company in America was founded in Charleston South Carolina in 1787. Today we can find insurance coverage for all types of potential risks. As society progresses and changes, risks increase and the business of insurance increases.

Why Bother with Insurance



Let's start with an example: You purchase a home that you can afford for 75,000. A fire devastates that home causing 50,000 in damage. You don't have the 50,000 to pay for the damage and you can't qualify for a loan because you just took one out for your house. If you have insurance, paying the monthly premium would allow you to cash in on that policy to repair your home. If you don't have insurance you will have to forgo the repairs and find another place to live because your home is not functional and you can't afford the outrageous costs to repair it. The small costs of a premium, compared to the potentially large cost that you cannot afford if something does happen are protection in exchange for payment.



Your monthly insurance payment would guarantee protection against the potentials of large cost damage or disasters. If something happened such as fire or flood, your insurance company would assume the cost of most or all of the damage depending on your deductable. Without insurance, most homeowners would not be able to afford the out of pocket costs associated with that type of damage. Insurance is a form of protection against possible damage and/or destruction to property or possessions.



It is possible that some people may never have a devastating event occur. The premiums and costs that they incur over the years for this coverage will never be recouped. With insurance you pay the agreed upon amount each year for the peace of mind that the insurance provides, regardless of it you have to use it.



Insurance comes in the form of a policy or contract that guarantees that by paying a fee or premium, the insured will be protected or reimbursed for losses by the insurer and when they occur. Insurance rates are negotiated at the time of the contract. These rates will depend on what you are insuring or protecting. Rates vary slightly with the package and type of coverage a person may need.



Fire, flood, natural disaster, illness, accident, life, car, camper, renter, and pet, and land, equipment: all of these are examples of insurance coverage. You name it and it can be insured.

Things to Consider when Shopping for Insurance



Insurance companies, policies and premiums are not all the same. Companies that offer insurance can vary greatly. When shopping for insurance it's important to consider the following things before shopping around:



Coverage options: What do you need?

Price: What can you afford?

Deductable: How much out of pocket can you afford?

What kind of support does the insurance company provide?



When shopping for insurance coverage there are many options. It's essential to think about the type of insurance company that you want and need. The internet now provides us with many more options than were available in the 1800's when the idea of insurance was developed. Some people prefer to work with local companies where they may call on the telephone or make in person appointments. Many insurance companies advertise nationally. These large companies may have low prices but non-local services. Others may operate primarily via website or telephone. You have to consider the option that you are most comfortable with. Consider if you willing to work with an agent on-line or would you prefer face to face meetings and/or local availability.



Insurance promises a guaranteed small loss of money to prevent a potentially larger loss of property or possession; such as a home or a car. The consequences of loss or damage of a large cost item such as a home or car or property could be devastating to most owners. By purchasing insurance at a small cost, the insurer provides protection over the assets in the event that something devastating happens. Insurance often times provides the peace of mind that most owners need to protect their investments.