Insurance

Insurance

What is Insurance

In simple term it may be defined as Insurance is a risk transfer mechanism.  It is a procedure of transfer the responsibility for losses occur in incident to specialists called insurance companies who may handle the risk by distributing it over a large number companies or people. Insurance can help you cover the cost of unexpected events such as theft, illness or property damage. Insurance can also provide your loved ones with financial payment upon your death.

Insurance is an deal with an insurance companies under which you pay them regular amounts of money and they agree to cover up your costs if a definite unfortunate incident occurs,  for example a damage of property, accident,  illness etc. Insurance, however, may also be arranged for a common occurrence, such as, if you reach a assured age.  An occurrence covered by insurance is referred to as an insurance event.  The person to whom such an incident occurs is called the person insured.  When an insurance incident occurs , the insurer will pay you a definite amount of money referred to as an insurance benefit / claim paid.  

The insurance claim will help you and may be your family to beat the financial difficulties that may begin from an insurance incident. 

Insurance is not provided free of charge. The insurer promises to pay you a benefit / claim amount as agreed in the insurance contract, upon the occurrence of an insurance incident. 

In addition, the insurer may charge you various fees. Hence, ask the insurer how much you will be required to pay in fees and other costs. Life insurance is particularly important in this case. 

 

Principles of Insurance

The primary purpose of insurance is assistance. Insurance is defined as the reasonable transfer of risk of loss from one entity to another on the payment of a specified premium.

Indemnity: 

It is the safety or protection against a loss or other financial difficulties. For purposes of insurance contracts, this could be viewed as financial compensation satisfactory to place the insured in the same financial position after a loss as he enjoyed immediately before it happened.

Insurable Interest: 

Insured must have insurable concentration in the subject matter. In case of life insurance, wife and dependents have insurable interest in the life of the person insured.

Utmost Good Faith: 

Both side parties have to enter into the contract in good faith. Insured should make available all the information that impacts the subject matter, where as the Insurer should offer all the details regard the insurance contract.