How does Insurance work? And what are the 10 best insurance companies in the United States?
Purchasing insurance can be so confusing. Too many conditions, coverage, exclusions, and endorsements can definitely cause doubt and possibly lead you to make the worst choice. And purchasing insurance isn’t really exciting or fun. But can you imagine your life without it? Can you imagine losing everything you own to a flood or a tornado and not having insurance to help get your life back on track?
In this article, we will explain how does insurance work so you can have a better understanding of it, and what are the 10 best companies for you!
What is an insurance?
Insurance is a contract between two entities, the insurer (Insurance company) and the insured (Individual or a business). The insurer will guarantee payment for an uncertain future damage. Meanwhile, the insured periodically pays a smaller amount of money called the insurance premium to the insurer in exchange for that protection on that uncertain future event.
Insurance is a contract that allows the transfer of the risk of financial loss from individuals or businesses to one single insurance company. The company collects small amounts of money from its clients and uses that money together to pay for losses.
Insurance is divided into two main categories:
Property and Casualty insurance, which guarantees protection to businesses and individuals for any loss related to their belongings or assets (like houses, cars, restaurants…) both physical and financial.
Life and Health insurance ensures its holders from emptying their bank accounts due to sickness or disease, it also protects their loved ones in the event of premature death.
What is insurance premium, and how is it calculated?
An insurance premium is the amount of money you will be charged to purchase or sign up for an insurance policy. Insurance premiums are sometimes paid on an annual basis, and sometimes, some companies allow a monthly payment of the premium.
The price of the premium has a base calculation, based on probability and various risk factors. The amounts clients pay must be sufficient for the company to pay for any future occurrence, pay its taxes and other expenses, and make a reasonable profit.
Insurance premium also depends on a variety of factors including:
Your personal information (location, job, age…)
The type of insurance
Any claims filed in the past
What are the social benefits of insurance?
Along with the personal benefits of insurance, Insurance funds are available for economic development of social sectors by investing in infrastructure projects like roads, power, water supply, telecom…
It helps society by reimbursing people and businesses for covered losses.
It encourages accident prevention.
It provides funds for investment.
It enables people to borrow money.
It reduces worry and stress related to accidents or unfortunate events that may occur.
What are the 10 best insurance companies in the United States?
1 – State Farm
State Farm is a large group of insurance and financial services companies throughout the United States with corporate headquarters in Bloomington, Illinois. The group’s main business is State Farm Mutual Automobile Insurance Company, a mutual insurance firm that also owns the other State Farm companies. State Farm is ranked No. 36 on the 2018 Fortune 500 list of the largest United States corporations by total revenue.
State Farm is the largest property and casualty insurance provider in the United States. It is also the largest auto insurance provider in the United States.
State Farm relies on exclusive agents to sell insurance policies. Only State Farm agents can sell State Farm insurance, and their agents can sell only State Farm products.
Experts’ Thoughts: If you want a local agent and a personalized insurance experience, State Farm is the best auto insurance company for you. However, State Farm doesn’t really offer drivers the best rates. If you want or need a curated experience, and are willing to pay for it, the best choice is State Farm.
2 – GEICO
It is the second largest auto insurer in the United States, after State Farm. The Government Employees Insurance Company (GEICO) is an American auto insurance company with headquarters in Chevy Chase, Maryland.
GEICO is a wholly owned subsidiary of Berkshire Hathaway that provides coverage for more than 24 million motor vehicles owned by more than 15 million policyholders as of 2017.
GEICO writes private passenger automobile insurance in all 50 U.S. states and the District of Columbia. The insurance agency sells policies through local agents, called GEICO Field Representatives, over the phone directly to the consumer, and through their website. Its mascot is a gold dust day gecko with a Cockney accent, voiced by English actor Jake Wood. GEICO is well known in popular culture for its advertising, having made a large number of commercials intended to entertain viewers.
Experts’ Thoughts: GEICO is one of the best auto insurance companies. Because it offers low rates, it is available nationwide and has an easy shopping experience. If you’ve had a prior accident, however, you’ll likely receive unfavorable rates from GEICO.