Insurance is a contract between the insurance provider (insurer) and the individual or group, in which insurer agrees to pay a certain sum of money to the individual or group upon a given contingency. To take this benefit, individual has to pay a fixed amount of money to the insurer on regular predetermined period of time and it is called as premium.
Functions of insurance
- Insurance provides certainty: It gives you certainty to receive a certain amount of money after happening of a given contingency.
- Insurance gives protection: Insurance gives protection from the probable loss which might happen any time.
- It gives you tension free life: After taking insurance, you become more concentrate & confident towards other work .So, we could say that it improves your efficiency towards other works.
- It spread the loss: Insurance distributes the loss falling on an individual or group over a large number of persons, each bears a nominal expenditure and feels free and safe.
Nature of Insurance
- It shares the loss which might fall on an individual or his family on happening of a given contingency as explained in the policy documents.
- Premium payment by the individual or group to the insurer to receive a certain sum on the given contingency.
- Insurer pays a certain sum to the individual or group on happening of a given contingency.
- Payment by the insurer is only made on a contingency which is explained on the policy documents.
- Insurance is not a gambling or charity.
You could also read the following blogs for knowledge: