What to know about insurance in general?


Insurance is commonly defined as the “transfer of the risk of a loss from one entity to another in exchange for a premium payment”. Loss, in this context, is being measured in monetary terms. Therefore, while you may suffer from the loss itself (i.e damage, injury, liability etc), you are covered financially for expenses resulting from it.

Insurers work by risk pooling and sharing the financial loss among all their clients. While all the clients pay a premium for the risk protection, only a percentage of them will actually suffer a loss.

In the economic sense, insurance also has to be affordable in order to work. If the amount of the yearly premium costs near to the value of the subject matter that is being insured, it will not make money sense for the policyholder to pay that much for a probability.There will then be little transfer of risk and value-add provided by the insurer provided to the insured.

It is true that the government in several welfare countries have given their residents a mandatory insurance coverage – especially so in healthcare. Depending on the country, it may or may not apply to temporary residents. Even if it does, the insurance is usually implemented to set a minimum benchmark and offers very basic coverage. To cover more risks and receive more compensation in the event of a claim, a private insurance plan has to be purchased. In fact, there are countries that lawfully require expats to purchase one.

In this section, we run you through the basics of insurance, including the outlets you can go to for purchase or information, as well as the No.1 honesty rule in a client-agent relationship.

If you think local and international plans are about the same, you will realise that you cannot be more wrong in our detailed explanation and comparison. The differences are something that expats, especially, should take note of.

Lastly, we outlined the factors that can affect your insurance pricing and give you some background on how insurers and underwriters work.


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