A flood, burglary or an accident can cause a lot of financial as well as physical damage and thus it is essential to safeguard it. There are many financial products insurance companies have come up with to help you pay if you get injured or to financially help you in case of damage to your property. In return, clients of these companies will have to pay a small fee so that it can be used later. Insurance is a tool where you transfer the financial risk to the company providing insurance.

Insurance Categories:
Though there are many types of insurance products in the market and they are broadly classified into two.
Health and Life Insurance: It covers people from monetary loss due to accidental death and health issues. There are medical insurance schemes that are specific to certain chronic diseases as well.
Property and Casualty Insurance: It protects people from losses to their property or other assets.

Insurance Premium and its Calculation:

The insurance premium is calculated based on the likelihood of the event occurring. It also uses various risk factors and the law of numbers to find the premium payable. If the likelihood of the event like flood or fire is high, the insurers pay a higher premium. Another factor considered is taking into account the probability of the insurer making a claim. The premium collected should be enough to pay for future claims and also to make a decent profit.

For example, a new driver taking out a car insurance will have to pay a higher premium as the chances of an accident is more when compared to an experienced driver. Insurers mostly ensure that there is no discrimination when there is a chance of loss to the company.
Though the premium offered by different insurance companies varies based on many factors, there is a government regulation in place on what is the minimum and maximum they can charge. But having said that, they are allowed to market their services and products in various ways.

Is Insurance Needed?
There are many types of insurance ranging from home insurance to health cover for pets. Some of the insurances are mandatory like car insurance and home insurance. There are others which are nice to have as they provide financial protection to you and your family.
Travel insurance is helpful if you are going abroad. It will protect you from expenses due to sickness or injury.
Life insurance will ensure your family is taken care of in case of your death due to unforeseen circumstances.
Home insurance will protect your belongings against theft and damage.
Income protection will cover your expenses if you are unable to work due to illness.
Based on your needs and your budget you can buy insurance.

People want to protect themselves from calamity and don’t mind paying a little money every month instead of trying to raise a huge amount of money during the crisis and thus end up buying insurances that are not required. There are others who think that they are not in any danger and end up in a financial mess. The idea is to be somewhere in between, there are certain insurances that is necessary and some that are not, so ensure you determine the needs and make a sensible decision.