What is insurance?
Introduction-
Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss. An entity that provides insurance is known as an insurer, an insurance company, an insurance carrier or an underwriter.
How does insurance work-
When you buy a policy you make regular payments, known as premiums, to the insurer. If you make a claim your insurer will payout for the loss that is covered under the policy.
If you don’t make a claim, you won’t get your money back; instead, it is pooled with the premiums of other policyholders who have taken out insurance with the same insurance company. If you make a claim the money comes from the pool of policyholders’ premiums.
Type of insurance?
1. life insurance-
Life insurance is a contract between an insurance policyholder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death of an insured person. Depending on the contract, other events such as terminal illness or critical illness can also trigger payment.
Property insurance provides protection against most risks to property, such as fire, theft and some weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, or boiler insurance.
3. Marine insurance-
Marine insurance covers the loss or damage of ships, cargo, terminals, and any transport by which the property is transferred, acquired, or held between the points of origin and the final destination.
The term fire insurance refers to a form of property insurance that covers damage and losses caused by fire. Most policies come with some form of fire protection, but homeowners may be able to purchase additional coverage in case their property is lost or damaged because of fire.
Liability insurance is a part of the general insurance system of risk financing to protect the purchaser from the risks of liabilities imposed by lawsuits and similar claims and protects the insured if the purchaser is sued for claims that come within the coverage of the insurance policy
guarantee insurance means the undertaking to perform an agreement or contract or to discharge a trust, duty or obligation on default of the person liable for the performance or discharge or to pay money on the default or in place of the performance or discharge, or where there is loss or damage through the default.
7. Health insurance-
Health insurance or medical insurance is a type of insurance that covers the whole or a part of the risk of a person incurring medical expenses. As with other types of insurance is a risk among many individuals.
- Providing Security: ADVERTISEMENTS.
- Spreading of Risk: The basic principle of insurance is to spread risk among a large number of people.
- Source for Collecting Funds: ADVERTISEMENTS.
- Encourage Savings.
- Encourage International Trade.
What are the Disadvantages of insurance?
- 1 Term and Conditions. Insurance does not cover every type of loss that can happen to an individual or a business.
- 2 Long Legal formalities.
- 3 Fraud Agency.
- 4 Not for all People.
- 5 Potential crime incidents.
- 6 Temporary and Termination.
- 7 Can be Expensive.
- 8 Rise in Subsequent Premium.
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