What Are the 5 Different Types of Insurance?

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Insurance protects people from the cost of unexpected events — or at least it protects them from having to pay for damages caused by those unexpected events. A contract that outlines what insurance covers is called a policy, and the person whom that policy insures is called a policyholder. The fee the policyholder pays is called a premium. When the specific type of event that the policy protects against actually does take place, the policyholder files a claim. If the claim is approved, the insurance company gives the policyholder money or accommodations.

Policyholders pay their premiums every month, every six months or every year. Payments are always due, even if the policyholder never needs to file a claim. Understanding these fundamentals about how insurance works is important, as there are five basic types of insurance that the average person will use throughout their lifetime.