Insurance and it's types or categories.

What is an Insurance Company? Define various types of insurance companies?

Insurance is a tool that individuals use to spread daily and lifetimes risks onto insurance companies who manage these risks. In essence, its the transfer of risk.  Insurance companies manage these risks by pooling the resources of the many to pay the claims of the few.

Insurance companies provide insurance policies, which are legally binding contracts for which the policy holder or owner pays insurance premium. According to insurance contract, insurance companies promise to pay specified sums contingent on the occurrence of future events, such as death or an automobile accident. Thus insurance companies are risk bearers. They accept or underwrite the risk in return for an insurance premium.

Insurance companies collect insurance premiums initially and make payments later when an insured event occurs , insurance companies maintain the initial premiums collected in an investment portfolio, which generates a return.

Type of insurance companies.

1. Life insurance:

For insurance, the risk insured against is death. The life insurance companies pay the beneficiary of the life insurance policy in the event of the death of the insured.

2. Health insurance:

In case of health insurance , the risk insured in medical treatment of the insured. The health insurance companies pay the insured all or a portion of the cost of the medical treatment by doctors, hospitals or others.

3. Property and casualty insurance: 

The risk insured by property and casualty insurance companies is damage to various types of property. Specifically it is insurance against financial loss caused by damage, destruction or loss to property as the result of an identifiable event that is sudden, unexpected.

4. Liability insurance: 

With liability insurance, the risk insured against is litigation or the risk of law suits against the insured due to actions by the insured or others.

5. Disability insurance:

Disability insurance ensures against the inability of employed persons to earn an income in either their own occupation or any occupation. Typically own occupation disability insurance is written for professionals and any occupation for workers.