Long and short-term insurance
Insurance is the protection against a possible eventuality. And it’s an arrangement by which you have with an insurance company who undertake to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium.
And there are many types of insurance from car, home to life insurance policies and many others. And when it comes to insurance you could either get long-term or short-term insurance.
With Long-term insurance
It’s insurance that you’re looking to insure a person for the long term. An example of this type of insurance is life insurance.
Life insurance is insurance that pays out a sum of money either on the death of the insured person or after a set period. It’s when the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries upon the insured’s death.
Therefore when a life is insured it’s deemed to be long term insurance. However when it’s any other items besides a human being that’s being insured, it’s short term insurance.
Short term insurance
It’s insurance that you take out on your possessions such as your house, car, cellular phone, furniture, etc. against loss due to events such as fire, burglary or damage. You can also buy short-term insurance to cover your health or disability events as well as a legal liability to others.
For instance if your car should ever been stolen and you didn’t have insurance. And let’s say it was a new luxury German car like a BMW that costs R350 000. It wouldn’t be nice to owe the bank R350 000 on this car of yours that you no longer have the pleasure of driving due to it having just gone missing, now would it.
Therefore with the insurer you transfer your risk of loss to an insurer and pay a premium to have that risk insured. And those are some of the in’s and out of long and short-term insurance.