Frequently Asked Questions on Insurance

Feedback, Corrections and Questions: FAQ Feedback Form Link: FAQ feedback form


Are insurance brokers regulated? ^^^
The industry is one of the most regulated industries in the world. Insurance companies must have sufficient capital to pay claims, they must offer insurance in different neighborhoods and to different ethnic groups. Most countries and states have public insurance commissions to ensure that the companies are financially sound and fair to consumers.
Can an insurance broker help me with financial planning? ^^^
Since having adequate insurance is such an integral part of the total financial planning process, most financial planning firms offer insurance advice to their clients. The other side of the coin is that many insurance brokers offer other financial planning products as part of an overall package for their clients.
Do I have to use an insurance broker? ^^^
In many cases, insurance companies only work through insurance brokers and not directly with individuals or businesses.
Do insurance brokers have to be licensed? ^^^
Most states and countries require a broker to have a license to sell insurance. Both agent and broker licenses are issued to individuals and companies.
Do insurance brokers offer products besides insurance? ^^^
Many insurance companies offer investment products such as annuities in addition to standard life insurance.
Does an insurance broker work for me or the insurance company? ^^^
An independent insurance broker works for you, the customer. Be wary of an insurance broker who claims to be independent but systematically pushes the insurance products of one company. He should be able to pick and choose among a number of insurance companies to provide you with the best policies for your
How are insurance premiums determined? ^^^
Insurance is not priced like most products, since cost to the insurance company is unforeseen and premiums are paid in advance before the actual costs are known. Insurance companies therefore determine premiums on historical risks, that is, the frequency of claims of this type and the severity of claims of this type.
How do annuities differ from life insurance? ^^^
Both annuities and life insurance include death benefits, but it is said that you buy life insurance in case you die too soon and an annuity in case you live too long. Life insurance provides a benefit to beneficiaries if the insured dies before financial obligations have been met, and annuities protect against outliving your assets.
How do I find a good insurance broker? ^^^
Contact a number of different brokers in order to decide. Make sure that broker’s professional staff is knowledgeable and courteous. Ask for references and contact those references to find out if they are happy with their services. Only deal with a broker who wants to sell a policy you need and can afford rather than the policy that he or she wants to sell you. Get a copy of any proposal they offer and get the A. M. Best (an insurance rating company) rating of the company offering the policy. An A or A++ rating from Best tells you that the insurance company has a good reputation and financial foundation.
How much insurance should I have? ^^^
The rule of thumb for life insurance is an amount equal to 6 to 8 times your annual earnings. Home insurance and auto insurance should equal the replacement value of the home or auto. Health insurance should cover your standard needs for health care, plus catastrophic insurance for major illnesses. Other types of insurance may be determined by your ability to afford the premiums and your level of comfort with the risk.
What is automobile insurance? ^^^
Automobile insurance protects a vehicle. If a vehicle sustains damage from an accident, automobile insurance will reimburse the owner of the vehicle for the cost of that damage. Automobile insurance will also cover liability in case someone is injured as a result of a car accident. If a car has been financed, the lender will frequently require that insurance be carried on it. Some states also require drivers to carry liability insurance.
What is business hazard insurance? ^^^
Similar to homeowners insurance, business hazard insurance will reimburse a business if they sustain losses to the property of the business.
What is business interruption insurance? ^^^
In the event a business suffers such a loss that they cannot continue to earn any income, business interruption insurance will provide an income to the business until they can. This kind of insurance is usually supplemental to hazard insurance since while the damage to the business is being repaired, the business may not be able to function.
What is health insurance? ^^^
Health insurance covers a portion of any medical bills including doctor visits, hospital stays and drug prescriptions. More extensive plans may also include dental care and vision care.
What is homeowners insurance? ^^^
Homeowners insurance protects a home. If a home sustains damage from fire, wind or other occurrences, homeowners insurance will reimburse the homeowner for the cost of that damage. Usually homeowners insurance does not include damage from flooding, and a separate policy must be purchased for flood damage. Homeowners insurance will also cover liability in case someone is injured at the home. Frequently the holder of a mortgage on a home will require homeowners insurance.
What is income protection insurance? ^^^
Income protection insurance supplies the insured with income in case he is unable to work for a period of time.
What is insurance? ^^^
Insurance is the promise of reimbursement in the case of loss. In exchange for periodic payments of insurance premiums, insurance companies agree with people or companies concerned about unforeseen hazards that if a loss occurs, the insurance will pay them to cover that loss.
What is life insurance? ^^^
There are many types of life insurance, but the basic explanation is that it gives a lump sum payment or payments over time to the beneficiary in case of the death of the insured.
What is long term care insurance? ^^^
Long-term care insurance can help pay for such care as help with eating, bathing, dressing, and other physical activities should the insured become unable to perform these functions.
What is long term disability insurance? ^^^
Disability insurance pays an insured person an income when that person is unable to work for an extended period of time because of an accident or illness.
What is mortgage insurance? ^^^
Mortgage insurance protects a mortgage lender against loss in case the borrower defaults. In this kind of insurance, the borrower pays the premium, but the lender receives the protection. Frequently, if a borrower is not a good credit risk or a small down payment is being made, the mortgage lender may insist on mortgage insurance.
What is the difference between universal life insurance and traditional whole life insurance? ^^^
Both traditional whole and universal life insurance policies are cash-value life insurance policies. In universal life policies, you can see the relationships among various elements of the policy such as premiums, cash values, interest credits, mortality charges, and expenses and how they interact with each other. In addition, unlike whole life policies, universal life policy returns do not have long-term, fixed-rate contracts but are to short-term interest rates and periodically adjusted. After an initial payment, universal life allows you to pay premiums anytime and in any amount, subject to certain minimums and maximums. You can also reduce or increase the amount of the death benefit more easily than under a traditional whole life policy.
What is the difference between worker’s compensation insurance and income protection insurance or disability insurance? ^^^
If you are injured on the job, many states and countries require the employer to pay for the costs of your medical care as well as to provide an income while you cannot work. The premiums for this insurance are paid by the employer. Income protection or disability insurance are types of voluntary insurance that a consumer may choose to have in order to protect himself in case of non-job related injuries or loss of income.
What kinds of insurance do insurance brokers deal with? ^^^
There are insurance policies to protect almost every aspect of business or personal life. Homeowners insurance, automobile insurance, health insurance, life insurance, income protection insurance, mortgage insurance, business hazard insurance and business interruption insurance, disability insurance and long term care insurance are the most used.
What kinds of insurance exist for specialty needs? ^^^
Almost anything that exists can be insured, but in addition to standard insurance such as life, health, home and auto, many policies exist to help cover losses. Some examples are boat insurance, travel insurance, identity theft insurance, credit insurance and per insurance.
Who are insurance brokers? ^^^
An insurance broker is an intermediary who obtains personal and/or business insurance for his clients with a range of insurers. They are usually independent of any one particular insurance company, although they may have more business with one or two.