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What are the common categorizations of insurance?
An insurance policy may have any of the following characteristics:
• Individual vs Group – Insurance policies may cover individuals or groups of individuals for identified risk(s).
⁃ Example: Ralph purchases a life insurance policy to cover him individually. Sam purchases a group health policy to cover his entire family.
• Personal vs Commercial – Insurance policies may cover personal or commercial activity or property.
⁃ Example: ABC Corp purchases a property insurance policy to cover its business location and equipment. Quentin purchases a homeowner’s policy to cover damages caused to his home by wind, fire, etc.
• Liability Insurance – Liability insurance policies may indemnify the insured or categories of third parties from potential liability for losses incurred in a specific instance or situation. It is commonly associated with losses suffered as a result of negligent conduct, but also may cover property damages.
⁃ Example: Doug is a medical doctor. He purchases liability insurance to cover damages to a patient from negligent performance of his services.
• Property & Casualty Insurance – Property and casualty insurance generally insures against damage to the subject property.
⁃ Example: Dough purchases a policy that insures his home against damage from all natural elements, such as wind, fire, or ice.
A policy may cover any or all of the above types of contingent risk.
• Discussion: Can you think of other categories or characteristics of insurance contracts?
• Practice Question: Bernard owns a small, home-based business. He has two employees who work at his home and these employees regularly meet with clients at this location. He is looking for an insurance policy to cover the risk of individuals coming onto his property and getting injured? Also, he wants to cover his property against potential theft or damage by clients. What types of coverage does he need?