Four Common Types of Insurance Cover and How to Save on Them

The four most common types of insurance cover are life insurance, health insurance, car insurance and home insurance, though not in that particular order.

Life insurance is taken against the risk of death, which we are all at, by virtue of being alive. The idea behind taking life insurance cover is to ensure that one's dependants don't suffer financial distress in the event of their (the policyholder's) death. So in the event of death - once a person with life insurance has been certified as having died - it falls upon the life insurance provider with whom they had taken the cover to pay the policyholders survivors (who might include spouses, children and other dependants) money from the policy - whose amount is typically agreed upon at the policy-signing time. This is paid either in lump-sum or in smaller but regular amounts over a longer period of time.

Health insurance on the other hand is taken against the risk of 'sickness' which like the risk of death, is one which we are all exposed to (of course in varying degrees), by virtue of our being alive. So the way health insurance works is that the policyholder pays sums of money called premiums to the insurance provider, under the agreement that should the policyholder fall sick, the insurance provider would foot their medical bill, typically up to a pre-agreed level and at certain agreed health facilities to prevent fraud.

Car insurance is typically taken against the risk of 'road accident,' though other risks like car theft might also be covered in some cases. The agreement here is that the car owner continues to pay certain sums of money called premiums to the insurance provider, under the understanding that should the car be involved in a road accident (or get stolen, in the relevant types of cover), the car insurance provider would take up liability for loss the accident (or theft) causes, typically to a given pre-agreed extent; or upon the assessment of the loss by the assessors attached to the insurance provider.

Home insurance, on the other hand, covers against a variety of risks - from theft to fire - with an agreement where the policyholder pays the insurance provider certain sums of money called premiums on a regular basis, and with the understanding that in event of the home that is so insured suffering from the events against which it is insured, the insurance provider would take up financial liability for the loss incurred - typically up to a given level.

Now the common factor that is seen is all these types of insurance cover is 'risk.' What the insurance providers typically do, then, is to charge those of their customers who have 'higher risk profiles' higher amounts of money in terms of premiums, with those of their customers who are said to be at lower risk being charged lower amounts of money in terms of premiums. Herein, then, lies the way for one to reduce their insurance costs: by reducing their risk profile. By adopting healthier living habits, for instance, one gets a way to reduce their health and life insurance costs, whereas by installing various safety features in their home or car, one would stand a chance to lower their home and car insurance costs, respectively, by significant margins.

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