Insurance

Insurance

Insurance is that the even handed transfer of the chance of a loss, from one entity to a different in exchange for payment. it's a kind of risk management primarily accustomed hedge against the chance of a contingent, unsure loss. An insurer, or insurance carrier, is merchandising the insurance; the insured, or customer, is that the person or entity shopping for the insurance. quantity|the quantity|the number} of cash to be charged for an explicit amount of amount is termed the premium. Risk management, the follow of evaluative and dominant risk, has evolved as a distinct field of study and follow.

The dealing involves the insured forward a warranted and famous comparatively tiny loss within the kind of payment to the insurance company institution} in exchange for the insurer's promise to compensate (indemnify) the insured within the case of a financial (personal) loss. The insured receives a contract, referred to as the insurance, that details the conditions and circumstances underneath that the insured are going to be financially paid.

Benefits of Insurance
Insurance covers many risks and uncertainties in the world of business and act as a boon to the industrial or commercial concerns and general public. The following are some of the important services of insurance.
Risk Transfer : Businessman can easily and conviently transfer the risk of loss of insurance. It also safeguard the interest of individual and public.
Protection : Businessman do not have to worry about losses or damage when the risk of loss to their property is duly insured. They will receive compensation against actual loss their position becomes "as you were" even though the actual loss takes place. In life insurance , life policy give financial protection to the dependents to the extent of the assured who may be the only bread winner in the family.
Assured Profit : An insured businessman or policy holders can enjoy normal expected profits eg. 15% or 20% margin of profit.
Benefits to Consumers: As the property of the businessman is duly insured, and he can get a normal profit margin, he can charge lower prices to consumers.
Insurance Serves as a Basis of Credit : Insurance has the effect of improving credit standing of businessman, commercial banks and financial institutions insist for insurance of articles which are kept as security for loans. Life policy is a valuable asset and can raise an emergency loan against it.
Investment : A life insurance contract provides not only protection but also investment, or a pension in old age. Under life policy, one can also get bonuses added to the policy amount when we have with profit life policy.
Insurance encourages savings : Insurance is particularly true of life insurance. The insured person must save out of his current income an amount equal to the premium to be paid regularly and punctually. Thus, life insurance is a compulsory form of saving for the rainy day. For persons of limited means there is no other alternative substitute of savings.
Capital Formation : Insurance companies as institutional investors can mobilize small national savings in the form of insurance premia. They usually invest these funds in shares and debentures of business companies and also in government securities. This leads to faster capital formation.
Insurance offers many benefits to society : Some of the more important services offered by insurance to society in general are :
It creates confidence among the investing public.
It ensures security and safety.
It provides tax relief benefits.
It encourages provision for the future.
It leads to higher savings and investments.
It helps as uncertainty of business losses is reduced.
It attracts employees of better ability and caliber.
It enables small businesses to complete with large ones.
It provides maximum economic growth of the country.
It creates employment opportunities.
It ensures larger industrial development.
It can be used as a measuring rod during the period of inflation and deflation.


Types of Insurance

Sad eventualities such as loss of income, death, sickness, accidents, damage to property and many more are difficult to accurately predict. But thanks to insurance, you can cover possible unfortunate events so that when they happen you can conveniently restore status quo. Below is a list of common types of insurance:

Life Insurance – Pays out a specified figure to the insured or specified beneficiaries on a specific event such as death of the insured. [More: Types of Life Insurance]
Personal Accident Insurance – This will compensate you if at any single time an external violent event causes you disability, injury or death.
Medical and Health Insurance – You’ll need it to ascertain continued flow of income if you fall sick or get injured to the extent that you can’t work and earn as before. It also covers cost of medication, hospitalization and surgery. [More: Types of Health Insurance]
Vehicle Insurance – If you own a car, motor cycle or any other motor vehicle, this insurance covers it against accident or theft. A compressive package covers all possible losses as well as damages to third parties such as pedestrians. [More: Types of Car Insurance]
Home Insurance – Take this cover to insure your home against loss or damage as a result of fire, electricity fault, plumping malfunction, flood, etc.
Travel Insurance – When travelling alone or with your family, this cover ensures you’re compensated for any loss, damage, injury, sickness or inconvenience that comes up as a result. It may cover personal accidents, hijackings, travel delays and more.
Burial Insurance – This is a practical way to ease the burden of your funeral expenses on your family and the loved ones you leave behind in the unfortunate event of death. The cover addresses all your funeral costs.
Wedding Insurance – The cover comes in handy when certain aspects of your wedding go wrong. For instance, if a caterer you already paid goes out of touch when approaching the wedding day, the cover will provide an alternative.
Dog Bite Insurance – An aggressive dog may bite children, the elderly or even postal carriers within your home compound. Thus, you need this insurance to protect your assets if sued for dog bite.
Portable Electronic Device Insurance – This covers portable devices such as cell phones, laptops or tablets. The cover ensures replacement or repair of such devices if they’re stolen, lost or damaged.
Crime Insurance – This covers you or your business against loss or damage as a result of criminal acts of third parties. Covered risks include loss of funds through embezzlement by employees.
Political Risk Insurance – This cover protects your business against loss or damage arising from politically-related conditions such as civil unrest, coups, riots and revolutions.
Workers Compensation – An employer takes this policy on behalf of their employees to cover loss of income or medical expenses resulting from a work-related injury or sickness.
Disability Overhead Insurance – This is a cover against overhead expenses for business owners who are unable to work.
Aviation Insurance – This covers aircraft operations against aviation risks. Specific policies will offer compensation for damaged aircraft as well as cover third party liabilities such as injured or killed passengers, damaged crops or property etc.
Crop Insurance – If you’re a farmer, the cover protects you from losses associated with crop failure as a result of bad weather, infection or infestation.
Earth Quake Insurance – This is a good way to cover your home or property against loss or damage emanating from an earthquake.
Terrorism Insurance – The cover duly compensates you for loss or damage that results from acts of terrorism such as bombings or mass shootings.
Kidnap and Ransom Insurance – This cover comes to the rescue where ransom payment is necessary to secure the release of someone you love or associated with if they’re kidnapped, detained or hijacked.
Plant Insurance – This cover protects industrial equipment, machinery and plant such as tractors and earth movers against loss or damage.
Professional Liability Insurance – This protects professionals such as doctors and architects when their clients bring negligence claims against them.
Mortgage Insurance – The cover comes to the aid of a lender if a homebuyer defaults.

Importance of Insurance

Human beings, his family and properties are always exposed to different kinds of risks. Risk involve the losses. Insurance is a tool which reduces the cost of loss or effect of loss caused by variety of risk. It accumulates funds to meet individual losses. It is not device to prevent unwanted event of happening or cause of loss but protects them against that loss by compensating which as lost. The role and importance of insurance are discussed as follows:

1. Insurance provides security
Insurance provides safety and security against the loss on a particular event. Life insurance provides security against death and old age sufferings. Fire insurance protects against loss
due to fire while Marine insurance provides protection and safety against loss of ship and cargo. For personal accident and sickness insurance financial protection is given when the individual is unable to earn. In other insurance too, this security is provided against the loss at a given contingency.

2. Insurance reduces business risk or losses
In Business, commerce and industry, huge properties are employed. Because of slight negligence, the property may be turned in to ashes. A person may not be sure of his life, health and cannot continue the business up to the longer period to support his dependents. By the help of insurance, he can be sure of his earning, because the insurance company will pay a fixed amount at the time of death, damage by fire, theft, accident and other perils.

3. Insurance provides peace of mind
Insurance removes the tensions, fears, anxiety, frustrate or weaken of the human mind associated with the future uncertainty. By providing financial position and promise to compensate losses arise out from various risk, it provides peace of mind and stimulates more and better work performance of an individual.

4. Life insurance encourages saving
The insured has an obligation to pay premium regularly and cannot be withdrawn easily before the expiry of the term of policy. Life insurance encourages the habit of regular and systematic saving through premium and after a certain period, it would be a part of necessary saving of the insured person.

5. Insurance accelerates the economic growth of the country
To develop the economic growth of the country, insurance provides strong hand and mind, with protection against loss of property and capital to produce more wealth. It provides protection against different kinds of loss caused by risk. It accumulates the capital from the insured and utilizes for the development of country. Thus, the insurance meets all the requirements for the economic growth of a country.

6. Insurance provides credit facilities
The insured person can get loan by pledging insurance policy and the interest will not exceed the cash value of policy charged by insurer. In case of death of insured person, the policy can be utilized for setting of the loan with interest. Business person can take loan on the basis of insurance documents from the bank also.

7. Insurance helps to reduce inflation
Inflation created from over supply of money and on less production entities. Insurance can help to reduce the inflationary pressure in two ways. Firstly, it collects money as an amount of premium which controls over supply of money and secondly, it provides sufficient funds for increase production entities. Thus, it reduces the impact of inflation.

8. Insurance makes security and welfare of employees
The security and welfare of employees is the responsibility of employer. These security and welfare are easily met by life insurance, accident and sickness benefit and pension which are generally provided by group insurance. The premium for group insurance is normally paid by  
the employer. Insurance is the simple method for employer to fulfil their responsibility. Due to these benefits, employee will devote their maximum capacities to complete their job.

9. Other Importances  of Insurance
a) Insurance helps to promote foreign trade providing protection again trade risk.

b) Insurance increases business efficiency eliminating the loss of damage, destruction, or disappearance of property of goods.
c) Insurance protects the social wealth providing protection against social evil.
d) Development of insurance business helps to solve the evil of unemployment, generating employment opportunity in the country.
e) The insured gets tax benefit in life insurance.