Insurance

Insurance

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, uncertain loss. Insurance is defined as the equitable transfer of the risk of loss, from one entity to another, in exchange for payment.

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Insurance is essentially an arrangement where the losses experienced by a few are extended among many who are exposed to similar risks. It is a protection against financial loss that may occur due to an unexpected event. The transaction involves the insured assuming a guaranteed and known, relatively small, loss in the form of payment to the insurer in exchange for the insurer’s promise to compensate or indemnify the insured in case of a large, possibly devastating loss. The insured receives a contract called an Insurance Policy which details the conditions and circumstances under which the insured will be compensated.

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Insurance can be classified broadly into-

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a) Life Insurance

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b) Health Insurance

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c) General Insurance