What is an Insurer?
An insurer is a company that provides insurance products to individuals and/or businesses. The insurer issues a contract agreeing to financially compensate the insured for specified losses in exchange for a certain amount of money.
What insurers do
Some insurers offer multiple types of insurance coverages, while others specialize in a specific kind of insurance. You might go to one insurer for your home and auto insurance, and another for your life insurance coverage.
Generally, though, insurers all handle similar responsibilities and services:
- Quoting. People usually don’t want to buy something if they don’t know how much it will cost. With insurance, that gets a little tricky since policies are priced based on the individual who wants coverage. In an effort to inform people about how much they’ll pay for the coverage they want based on their specific risk factors, insurers issue quotes.
- Risk evaluation. If the individual or business wants to move forward with the provided quote, they apply for the policy. At that point, the insurer starts a more detailed delving of that individual and the specific factors that will affect coverage. For life insurance, that usually means medically evaluating the individual to determine a rough estimate of their life expectancy. The insurer then determines if the individual is insurable, meaning it makes financial sense for the insurer to offer them a policy. If the individual is deemed too high-risk, the insurer can deny coverage.
- Issuing coverage. If the insurer approves the individual or business’s application, they then issue the insurance policy. This is essentially a contract that binds both the insured and the insurer. The policy specifies which risk(s) it covers, and what the insured will receive should that risk occur. In the case of life insurance, the risk is death. And the life insurance policy states that at the time of the insured individual’s death, the life insurance provider will issue a predetermined amount of money to their beneficiaries.
- Collecting premiums. Insurance isn’t a one-way agreement. The insured needs to do something in exchange for the risk mitigation they get from their insurer. That takes the form of paying premiums, or money to the insurer in exchange for their coverage. Most premiums are paid on a recurring basis (e.g., monthly, annually), but some life insurance policies can be paid in full upfront. These are called single-premium life insurance policies.
- Handling and paying out claims. Once you get an insurance policy in place, this is the primary function you expect your insurer to fulfill. Essentially, that means that any time you face a loss covered by your policy, they will pay the agreed-upon amount. In most cases, the insurer won’t automatically issue you a check, though. To prevent insurance fraud (i.e., getting money even when no loss has occurred), they require a claims process. This is designed to provide evidence of the loss. With life insurance, the claims process usually entails the beneficiaries presenting the insurer with the insured’s death certificate and a copy of the life insurance policy.
Insurers handle the above processes differently. Some allow their insured to submit claims and pay premiums online, for example.
