An act of insuring, or assuring, against potential future losses in exchange for a periodic payment called premium. In other words, one of the parties undertakes to indemnify or guarantee another party against loss by certain specified risks.
Insurance works on the basic principle of risk-sharing. A great advantage of insurance is that it spreads the risk of a few people over a large group of people exposed to risks of similar types.
Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed and known small loss to prevent a large, possibly devastating loss. An insurer is a company selling the insurance; an insured or policyholder is the person or entity buying the insurance. The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, called the premium.
Benefits of Insurance
- Financial Security of Life and Assets in case of an unfortunate event
- Tax Relief by way of deductions from Income, which lowers tax burden
- Encourages saving and helps in Financial Planning for the Future
- Life Insurance Policies can be used as a security to obtain a Loan
Types of Insurance There are many types of Insurance products available today covering both Life and Non-Life. In Non-Life, apart from personal covers such as accident covers and health insurance, there are products covering liabilities under a particular law and or common law. The various products are designed to cater to different needs of an individual or industry such as fire insurance policy on multi-storied building, policy on personal property which includes things like jewelry, electronic equipment and even owned vehicle’s.