| Who can live in the modern world without | | | | |
| insurance? People insure anything and | | | | Traditional insurance companies were mutual |
| everything nowadays to feel secure about | | | | or stock companies, depending on the |
| their possessions in this risk-filled world. | | | | ownership of the company: policyholders and |
| And so insurance companies have become part | | | | stockholders, respectively. But mutual |
| and parcel of life today. | | | | insurance companies are very rare now, and so |
| | | | we can go into a more practical |
| An insurance company is an organization that | | | | classification. Insurance companies can be |
| sells insurance policies and assures security | | | | classified as mainly Life Insurance companies |
| for the client or administrator. Insurance | | | | and General Insurance companies, dealing in |
| companies are in the business of providing | | | | life insurance and property and auto |
| financial protection against risks involved | | | | insurance, respectively. They differ in their |
| in property, houses and health. They make | | | | functions and services because life and |
| profits from the premiums paid by their | | | | related insurance policies are taken out for |
| clients. This money is technically termed | | | | long periods of time, whereas general |
| "float," and the success of an insurance | | | | insurance policies cover short periods of 1 |
| company will depend on the success of its | | | | to 5 years. There are companies that sell |
| floats. If the floats are successful, the | | | | both life and general insurance also. |
| company will profit even if it pays back the | | | | |
| entire amount it has received in premium. | | | | Insurance companies are rated by financial |
| | | | rating services like A. M Best, Standard & |
| Even when insurance companies pay out more | | | | Poor, Fitch and Diamond Bond. If you buy |
| money in claims that they actually receive in | | | | policies from a company that comes in the top |
| premiums, as most companies do, they still | | | | four in any of these ratings, you can |
| make profit by investing the money at a | | | | consider your insurance to be in safe hands. |
| larger return than their cost of float. | | | | |