Insurance facts for kids
Insurance is a way for people to protect themselves from losing money. Imagine you have something valuable, like a bike or a phone. If it gets broken or stolen, it costs money to fix or replace it. Insurance helps you with these unexpected costs.
When you buy insurance, you pay a small amount of money regularly, often every month. This payment is called a premium. In return, an insurance company promises to pay you money if something bad happens to what you've insured. This helps you avoid a big financial problem. However, you also have a "duty of care," meaning you need to be careful with what's insured. If you're not careful, the company might not have to pay.
Contents
What are the Main Types of Insurance?
There are two main types of insurance: life insurance and general insurance. They cover different things.
Life Insurance Explained
Life insurance is about protecting people's lives. Someone buys this insurance for themselves or another person. If the insured person passes away, or when the insurance policy reaches a certain date, the insurance company pays a sum of money to the people named in the policy. This helps their family financially.
Understanding General Insurance
General insurance covers many other things that are not about life. It protects your property or against other risks.
Fire Insurance
Fire insurance helps if your house or belongings are damaged by fire. The insurance company pays to repair or replace what was lost.
Marine Insurance
Marine insurance covers things that are transported by sea. It protects ships and the goods they carry from damage or loss during a voyage.
Who are Actuaries?
Actuaries are special people who work for insurance companies. Their job is to figure out how much the premium should be for different types of insurance.
They are like detectives who study risks. They look at how likely it is that something bad will happen. For example, they might look at how often cars get into accidents or how many houses burn down.
Based on these chances, they decide how much money people need to pay for their insurance. If there's a high chance the company will have to pay out, the premium will be higher. They make sure the company collects enough money to pay for claims, but also that the prices are fair for customers.
Images for kids
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An advertising poster for a Dutch insurance company from c. 1900–1918 depicts an armored knight
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Merchants have sought methods to minimize risks since early times. Pictured, Governors of the Wine Merchant's Guild by Ferdinand Bol, c. 1680.
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Lloyd's Coffee House was the first organized market for marine insurance.
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Leaflet promoting the National Insurance Act 1911.
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A wrecked vehicle in Copenhagen
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Workers' compensation, or employers' liability insurance, is compulsory in some countries
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Amicable Society for a Perpetual Assurance Office, Serjeants' Inn, Fleet Street, London, 1801
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US Airways Flight 1549 was written off after ditching into the Hudson River
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Hurricane Katrina caused over $80 billion of storm and flood damage
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The demand for terrorism insurance surged after 9/11
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The subprime mortgage crisis was the source of many liability insurance losses
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High-value horses may be insured under a bloodstock policy
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Certificate issued by Republic Fire Insurance Co. of New York c. 1860
See also
In Spanish: Seguro para niños
