In return for the insurer’s promise to pay money in the event of a loss, the insured person must pay a fee to the insurance company. Because there are many people paying these fees at the same time, the insurance company can afford to pay an individual if they suffer a loss. This is called risk pooling.
Not everyone will suffer the loss that they have insured themselves against. This means that there are more people paying money to the insurance company than there are seeking money from it.
The difference between the fees paid to the insurer and the amount paid out is profit for the insurance company.
APPLYING FOR INSURANCE
Step 1: Choosing the Right Insurance Company When a person decides to get insurance, the first thing they should consider is what exactly they want to insure. This will affect which type of insurer they contact, such as a car insurer, a home insurer or a health insurer.
Most insurance companies provide different types of insurance. For example, Aviva offers car, home, health and travel insurance.
A person who wants insurance can also contact an insurance broker. An insurance broker sells insurance for a number of different insurance companies. They can offer advice about which insurance company is best suited to a person’s needs.
