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Introduction

Wherever there is uncertainty there is risk. We cannot


have control over uncertainties which involves financial
losses. The risk may be in certain events like death,
retirement, or uncertain events like theft, fire, accident
etc and insurance is the method of coping with risk.
Insurance is a financial service for collecting the savings of
the public and providing them with risk coverage. The main
function of insurance is to provide protection against the
possible chances of generating losses. It eliminates worries
and miseries of losses by destruction of property and death.
Insurance is a contractual relationship that exists when
one party (the insurer) for the consideration (premium)
agrees to reimburse another party (insured or the third
party on behalf of the insured) for the loss to a specified
subject (risk) caused by designated contingencies (hazards
or perils).
In other words, Insurance means protection against risk of
loss. It is a sort of Provision which a wise man makes
against unfortunate happening such as death, fire etc. It is a
protective measure in the sense that it gives compensation
to the sufferer of loss on the unfortunate happening. The
scheme of the Insurance is based upon the Principle of
‘Mutual co-operation’. Insurance may be defined more
formally as
“A system under which the insurer, for a consideration
usually agreed upon in advance, promises to reimburse the
insured or to render services to the insured in the event
that certain accidental occurrences results in losses during
a given period.”
“Insurance is the subject matter of solicitation.”
Insurance is a specialized contract which has two parties
the insurer and the insured. The insurer is the insurance
company who will provide the cover to the insured against
any financial losses. The insured may be an individual
person or a group of people like an employer, members of a
society, etc.
Issuer issues a policy/contract between the insurer and the
insured, which states the risks covered, the exclusions, if
any, and the benefits reimbursed on the happening of an
event like death, illness, theft, fire etc. and all the terms and
conditions about the contract.
The policy is paid through a fee called as a premium,
which is a set amount that must be paid by the insured on
annual basis. Only on the happening of a certain event like
death, disability, fire, loss etc; for which the insured is
covered, the benefit amount stated in the policy contract
can be claimed by the insured.

Need for Insurance

When we hear the word insurance, the word sounds boring


and dull in ones mind. It is realized that insurance is not a
fun topic to discuss or think about, yet it is important and
serves to protect our financial futur

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