What is the difference between direct and indirect insurance?

Direct insurance involves a direct contractual relationship between an insured person and an insurance company. In this arrangement, the insured person pays an insurance premium in exchange for the insurer’s promise to pay for any losses that occur. Indirect insurance covers losses that occur due to the actions of third parties. For example, in Maine, people may purchase automobile insurance that covers losses caused by the negligent actions of another person. The insurance company pays the losses and the insurance policyholder is not responsible for them. Direct and indirect insurance differ in terms of the type of coverage, who is responsible for the losses, and how the policy is administered. With direct insurance, the policyholder is responsible for the losses and the insurance company takes on the risk. With indirect insurance, the risk is assumed by the insurance company, and the policyholder is not responsible for the losses. The policyholder does not have to pay a premium for the coverage. Direct and indirect insurance also differ in terms of how the policy is administered. With direct insurance, the policyholder pays a premium and the insurer processes and administers the policy. With indirect insurance, the insurer pays for the losses and the policyholder does not have to do anything. Overall, the key difference between direct and indirect insurance is that with direct insurance, the insured person is responsible for the losses, and with indirect insurance, the risk is assumed by the insurance company.

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What is the difference between direct and indirect insurance?

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