Welcome to the Insurance pages of the Info Library. Here, you can find basic FAQs and explanations of insurance in general, plus each type of insurance that is listed on Which Way To Pay. Move down the page or click directly on the link of the product you would like to learn about.


Please see information on Insurance below.

Simply click on the relevant topic to be taken directly to the relevant pages.

What is Insurance?

Insurance could be described as transferral of risk. In other words, by taking insurance you are transferring risk of loss to the insurance provider. In America, there are many different types of insurance and each one deals with a different set of risks and possible events.

Most firms (regardless of size) take insurance to cover their business, and to transfer risk in case of loss of income from a variety of events. For instance, if the electrical equipment in a hair salon breaks down, then the salon will lose business it will be unable to provide its services. The insurance will cover this loss of earnings.

In the same way, individual people take insurance to cover their own potential financial loss. For instance, you might take insurance to cover your home so if it becomes damaged from bad weather, your insurance payout will cover the costs.

What is a Policy?

An insurance policy is a contract that is made between the insured (that's you) and the insurer (the insurance firm). It is legally binding which means you have to honor the terms of the contract and so does the insurance firm.

What is an Event?

An event in the world of insurance is not a party, but is something that happens which results in the insured needing to make a claim.

For example, an event could be a flood which causes extensive damage to your floors. If you already have insurance for this event, then you can make a claim and receive financial payout according to the terms of the contract.

What is a Claim?

A claim is what you as policyholder are required to do after an event. So, if your home as received damage from flooding, you must contact your insurance provider to make a claim.

The insurer will then examine your case, check all of the surrounding circumstances (including whether your policy is fully equipped to deal with flooding) and you will receive a payout.

What is Premium?

Premium is what you pay for your insurance policy. Usually premium is paid slowly over a set length of time and is generally calculated per year.

By paying premium, the insurance firm agrees to payout in the event of you making a claim as per the terms of the contract. Premiums vary according to the level of risk, what is insured and your personal circumstances.

What is Excess?

Excess is the money that you pay in case the claim you make is higher than the amount covered in your policy. In other words, you are therefore required to make up the difference to the insurance firm. Excess is typically deducted from the level of cover you have on your insurance policy.

What is Liability?

Liability is another word for responsibility, or accountability. For example, most auto insurance policies include an area for Third Party Liability. That means the accountability you take for damage caused to the property or harm of/to another person while you are using your car on public roads.

Third Party Liability means that if you cause an accident and another person is involved, your insurance policy will provide you with financial cover to loss or damage to their car or person by providing them with compensation.

Liability insurance is especially important if you are sued by another party as a result of your actions or negligence.

How Much does Insurance Cost?

The amount that insurance costs you depends largely on the amount of cover you take, on the insurance firm you use and the level of risk. You may be subject to additional fees or tax accountability on your insurance so make sure you find out what these are, if any.

Therefore, it is wise to use not just the main quoted price as your guide but always to find out additional costs and fees before making a choice.

Risk is key to the price of insurance premium. This is because the more likely you are to make a claim, the more expensive your premium becomes. In America and many other countries, young drivers end up paying higher premiums because they are widely seen as being more likely to cause accidents on public roads than older drivers.

The cost of insurance can be compared with the cost of paying for something if insurance is not present. For instance, how much money would you have to fork out if your home is burgled out of your own pocket if you didn't have home insurance cover?

What are the Benefits of Insurance?

Insurance has many benefits and is also a wise precautionary measure. The more significant a risk is the more reason to take insurance cover. Yet even smaller risks can benefit from cover including sentimental value. Your personal possessions may not be worth a great deal if you were to sell them but they might have a great deal of sentimental meaning to you.

In some cases risk is high so if you have a terminal illness, you know the fact of death is less a 'maybe' then a matter of 'when', however sad that may be. Taking insurance to cover your family after you're gone could therefore be even more important than to a young person of excellent health.

What are the Disadvantages of Insurance?

Some people feel that insurance is like paying for something that might never happen. Yet more often than not, people find themselves in a situation where they are required to pay for something which an insurance policy could have covered.

This can lead to financial loss and even debt as statistics have shown, a high proportion of people in America do not have adequate health insurance and have landed in severe debt as a result of requiring medical treatment which they have had to pay out of their own back pocket.

One thing to be careful with regards to insurance is to ensure that it is providing the level of cover that you need and want. Too often, people buy a policy without checking every aspect and clause fully. Then, they have had to make a claim and been unsuccessful simply because their policy didn't cover them adequately.

Make sure you check every aspect of a potential insurance contract and if necessary go over it with an independent source.


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