Introduction

What is Insurance?
Insurance Co Promises to pay the owner of Insured asset a certain sum,if there is any adverse/unfortunate situation.

Insurance does not protect the asset nor does prevent the loss due to event happening.Insurance only tries to reduce the Impact of Loss on the Owner of the asset and those depend on that asset,they are ones who benefit from the asset and would lose income when the asset is damaged.

Insurance Only tries to compensate the loss impact and that too not-full extent.

Only Economic Risks can be insured,so sorry folks,your daily head spinning stock market fluctuations are not insured!!!

Life Insurance.
Life insurance is a contract between the policy holder and the Insurance Co, where the Insurance Co agrees to pay a certain sum of money on event of the insured persons death.In return, the policy owner agrees to pay a pre-decided amount called a premium at regular intervals or in lump sums.

An human being income generating asset,he can be lost through early death or sickness or by accidental events.

Accidents may or may not happen.death will happen but timing is uncertain,but if it happens earlier when alternate Income source is not present,then there will loss and financial difficulty to the person and his dependents.

for eg.
when a bread winner dies the source of income for his family dies,financial and economic condition of the family is affected...like school-going kids will have to drop out of school due lack of money for school fees,..etc..

those dependent on that income are helped to overcome their financial difficulties by Insurance.

General Insurance.
Without insurance,trade and industry will find it difficult to face the impact of major disasters like fire earthquake and floods.Financiers like banks would go belly up,if the factory financed by it is reduced to ashes in a terrible fire,Insurance cover helps the financiers,if their loan party defaults on loan.

Insurance Cos are called Insurers.the business of insurance is
(a) is to bring together persons with common interests(i.e mutual sharing the same risks).
(b)Collect the Risk-contribution called premium from all of the person with common
interest.
(c)pay out compensations(called claims) to those who suffer from the risks.

Insurance spreads the losses of an individual over the group of individuals who are expose to similar risks.

Premium.
Premium for Insurance is based on expectaions of the losses.these expectaions are based on study of losses from the past with statistics.

Insurance Co as a trustee.
The Insurer is a trustee,as it manages the common fund on behalf of large community of policy holders,he should Ensure Nobody takes Undue advantage of this arrangement..so no rajus or kajus are allowed to take your money.

the decision to allow entry is called "Underwriting of risk".Underwriting means assessing the risks.premium charged depends on this assessment of risk.