the person or company providing you with financial support or coverage if a bad or unexpected event occurs, covered on your homeowner's policy or renters insurance.
How an Insurer Works
Insurers sell insurance policies, create insurance quotes, handle claims filed by policyholders, and offer financial compensation as coverage if need be. An insurer will ask you for information, such as your name, address, and date of birth, via an online form or phone when you apply for insurance. If you are applying for renter's insurance or insurance covering valuables, they may also ask you how much these things are worth. After, the insurer calculates the risk of insuring you while also considering the condition and location of your place, your claims history, and other things.
They will offer you a premium, which you would pay over the year. If you choose to purchase your chosen insurer's coverage, they will cover you for everything outlined in the policy. Insurers will also give you financial compensation for lost or damaged properties as long as your insurance policy covers them.
If something happens to you under your insurance policy, it is your right to file a claim with your insurer. The insurer then checks your claim against your current policy to ensure the occurrence is covered. The claims process takes anywhere from a few seconds to a few months. If your insurer approves your claim, they pay for the loss.
Example of an Insurer
Let's assume you recently started a BBQ restaurant and you feel the need for financial security or a backup plan in case of a fire. It would help if you had fire insurance. You do your research and find an appealing fire insurance company. Let's call the insurance company XYZ. In this case, XYZ is your insurer, and with the help of your fire insurance, your insurer compensates you for any losses arising due to an accidental fire.
This means that XYZ bears the responsibility of taking your business back to where it was before the fire because you have insurance for such accidents. Because the fire insurance doesn't protect only fire losses, XYZ also compensates you for certain consequential losses. Now, you can see that XYZ has your back and saves you the pain and stress of starting from scratch to set up your business after such a bad event. There are various insurance policies, but what remains constant no matter which you choose is that you are the insured, and the insurance company (XYZ) is the insurer.
Note that you have to make monthly payments of a specific amount to your insurer as a premium. This money is what enables your insurer to reimburse you when accidents occur. You can consider premiums as monthly savings with XYZ towards any accidents in the future.
Types of Insurers
You can purchase insurance for just about anything—even Hollywood actors insure parts of their bodies. Gretta Garbo famously insured her legs. Because of this, there are insurance company categories for every situation. Here are some of the more common ones you'll come across:
- Standard Lines: insurance companies that sell specific types of insurance within a specific state.
- Excess Lines: insurance companies that cover specialty risks, like high-risk auto insurance. These insurers will cover individuals who do not qualify for standard insurance lines because their risk goes against state guidelines.
- Captives: insurers that cover industries, groups, or specific risks, e.g., shipping and handling.
- Mutual Companies: insurers owned by policyholders. These policyholders receive dividends from the insurers.