What is Insurance? Who Are The Top 3 Insurance Companies?

What Is Insurance?

Insurance is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients’ risks to make payments more affordable for the insured.

Insurance policies are used to hedge against the risk of financial losses, both big and small, that may result from damage to the insured or her property, or from liability for damage or injury caused to a third party.

Understanding How Insurance Works

There is a multitude of different types of insurance policies available, and virtually any individual or business can find an insurance company willing to insure them—for a price. The most common types of personal insurance policies are auto, health, homeowners, and life. Most individuals in the United States have at least one of these types of insurance, and car insurance is required by law.

Businesses require special types of insurance policies that insure against specific types of risks faced by a particular business. For example, a fast-food restaurant needs a policy that covers damage or injury that occurs as a result of cooking with a deep fryer. An auto dealer is not subject to this type of risk but does require coverage for damage or injury that could occur during test drives.

There are also insurance policies available for very specific needs, such as kidnap and ransom (K&R), medical malpractice, and professional liability insurance, also known as errors and omissions insurance.

Looking for the best auto insurance companies? A huge percentage of people never shop their car insurance needs — and that’s a bad idea, considering that modern American business punishes you when you stay loyal to a company, rather than rewarding you.

Who are the top 3 insurance companies?

USAA

USAA was named the top pick for auto insurance in almost every single region of the country, according to the J.D. Power 2019 U.S. Auto Insurance Study.

But the downside with USAA, if there can be said to be one at all, is that most of the insurance coverage and other financial services it offers are only available to those in the military, those who are veterans or those who are affiliated with the military through direct family ties.

So that may eliminate USAA from consideration for a lot of people.

Amica Mutual

Unlike USAA, Amica Mutual has no artificial barriers to entry. But because Amica Mutual is a mutual company, it tends to be very expensive during your first year as a customer.

When you join a mutual company like Amica, there are no shareholders like there are with other public companies. You become a part-owner of the company when you sign up for insurance.

So that first year, with the higher upfront costs, is basically you “buying into” the company. After that, customers typically get an annual premium rebate equal to about 20% of what they paid that year, subject to how the company is doing financially.

NJM Insurance

Also, a mutual company, New Jersey Manufacturers Insurance Company (NJM) boasts in its press releases that it generally beats other insurers’ premiums in the Garden State by 20%, according to N.J. insurance regulators.

In addition, NJM recently became the first company to receive the J.D. Power Personal Auto Claims Certification — a feat it has now repeated for two years running.

The newly created certification “recognizes brands that provide exceptional claims experience in the automobile, property and small commercial segments.”

Meanwhile, NJM expanded its service to Pennsylvania in 2018. That opens the company up to an even bigger potential auto insurance customer market in the Mid-Atlantic.

And, of course, being a mutual company, policyholders get an annual dividend back from NJM each year.