Insurance is a defensive measure used against future conditional losses to hedge the possible risks of the future.

It is a legal
contract that protects a person from contingent risk of losses through financial means and provides a means for individuals
and societies to handle some of the risks faced in daily life.
These contracts of insurance are called policies and are provided by insurance companies. The Insurance companies charge
a regular amount from the customers, which is paid back, either in part, or entirety, to the customers in case of a definite
loss. This regular amount charged from customers is called Insurance Premium.
REASONS OF INSURANCE:
Sometimes in life it is not possible to avoid the losses. For example People may become ill. They may die of illness or
accidents or their homes or other property may undergo damage or theft. So in all these cases and they have to face the loss
of income or savings. So insurance is a manner of financially insuring that if such an incident comes about then the loss
does not affect the present well being of the person.
DOCTRINES OF INSURANCE:
1 There should be a certain definite loss taken place at a known time, in a known place and from a known cause. Therefore
the time, place and the cause of loss should be clear enough.
2 The incident that represent the cause of the claim should be accidental or beyond the control of the beneficiary.
3 The size of the loss must be significant from the perspective of the insured. Insurance premiums should cover both the
estimated cost of losses, plus the cost of policy, regulating the losses, and providing the principal required to logically
assure that the insurer would be able to reimburse claims.
4 The amount of premium should be affordable.
5 The possibility of loss and the cost of compensation should be calculable or estimable
TYPES OF INSURANCE:
Below are some kinds of insurances.
LIFE INSURANCE:
Life insurance policy insures the life of the insured. The insurance company is legally bound to provide a monetary benefit
to a decedent's family or the beneficiary after the death of the policyholder. The proceeds are paid to the beneficiary either
in a lump sum amount or an annuity
MEDICAL INSURANCE:
Medical insurance is also called medclaim. Under this policy the insurance policy pays the amount to the insured for his
health purpose. This amount covers the cost of medical treatment.
DISABILITY INSURANCE:
There are two types of disability insurance.One is simple disability insurance and the other is total disability insurance. In
case of simple disability insurance,a financial support on monthly basis is provided by the insurer to the policy holder if he
is unable to work due to an injury or an illness. But permanent disability insurance provides the reimbursement if a person
becomes permanently disabled.
GENERAL INSURANCE:
It includes automobiles insurance, business insurance, property insurance etc.
Automobile insurance:
In UK this insurance is called motor insurance. It compensates the loss or damage occurred to the vehicle. But in United
States auto insurance policy is essential to legally operate a vehicle on public roads.
Business insurance:
Business insurance protects the businesses against risks of losses and damages and compensates in case of loss
Property insurance:
This type of insurance protects the property against the risks like fire, theft etc. This category also includes fire insurance,
flood insurance, earthquake insurance etc
Fire Insurance:
It is an insurance covering the damage to the property caused by fire.
Flood Insurance:
This type of insurance pays the policy holder in case of any loss or damage to the property due to flood. It protects the
property against the flooding.
Earthquake Insurance:
This insurance compensates any damage to the property caused by earthquake.
IMPORTANCE OF INSURANCE in business
Insurance plays an important role in sharing the risks of people in an affordable form.It helps the people to quickly recover
from damages and losses.
Despite continuing educational efforts many people lose much of their income each year to some sort of fraud, identity
theft, bad investments, get rich quick, or to good to be true schemes. Some individuals seem to be particularly prone to such
loss; it may equal their yearly savings, or even erase them. It is difficult to identify the type.
They can be found in the lowest strata of society or in high financial district offices. Wherever they are they seem to look
for opportunities to lose their money in questionable deals. They become the prey of a lifelong parade of tricksters who
continually descend upon them as though by instinct. Neither legislation nor education can stop the practice. Such
predisposed suckers will fight both law and understanding, continuing to insist on their right to be free ó and cheated.
There are also whole classes of people, racial or vocational minorities most often, who fail to benefit from either protective
law or instructive publicity. In our high tech civilization, these groups remain economically depressed, not only because of
their low earning power and susceptibility to cyclical unemployment, but also because they are unable to handle whatever
money they do get their hands on, and are constantly preyed upon by a marginal business community still using nineteenth
century ethics.
It is difficult to blame any individual sunk in this morass of low dealing. Too few dollars are being spread too thin at this
level. Most of the businessmen involved would love to move "uptown" or "downtown" and play it clean. They never clear
enough profit to get out of the rut themselves. If often appears useless to subsidize the depressed groups with additional
cash. The fact is that they are rooked out of half of what they do get.
Above this level, among the vast majority of Americans, from the lower middle class on up to the wealthy, we find a
persistent apathy regarding daily money loss through shenanigans or carelessness. Literally hundreds of thousands of
professional criminals make a parasitic living out of fishing in the daily stream of cash. They range from perfumed, silk-
suited con-men to grubby panhandlers, all making an excellent tax-free living.
In another category we find the respected business manager or assistant who is tempted to tap the till. Recorded reasons for
business failures have never considered the possibility of such factors going undiscovered during the brief life of
unsuccessful enterprises. Insurance companies have plenty of information to indicate the importance of such loss as a
constant factor in business.
Basic to the situation is the faith the businessman has in those he hires, even when he has not the slightest idea who they
really are. The main cause of day-to-day individual loss is carelessness coupled with the lack of ability to count up the
simplest numbers. Surveys among store clerks and money tellers show that great numbers of them frequently miscount. So
do the customers. We have pursued the subject further in How to Beat Employee and Customer Stealing.
Losses to individuals through carelessness, ignorance of newest swindling techniques, or general inability to handle money
wisely can often put a family into the red, undermining an otherwise solid future. Here then, for your information, is a
survey of current gyps, dodges, deals, angles, and gimmicks. Recognizing a cheat when you see one is the best way to beat
him at his game.
This is why insurance is important in business.

1. Removal of uncertainties
Insurance company takes the risks of large but uncertain losses in exchange for small premium. So it gives a sense of
security, which is real gift to the business man. If all uncertainty could be removed from business, income would be sure.
Insurance removed many uncertainties and to that extent is profitable.
2. Stimulant of business enterprise
Insurance facilitates to maintain the large size commercial and industrial organizations. No large scale industrial
undertaking could function in the modern world without the transfer of many of its risks to insurer. It safeguards capital and
at the same time it avoids the necessity on the part of industrialists. They are therefore free to use their capital as may seem
best.
3. Promotion of saving
Saving is a device of preparing for the bad consequences of the future. Insurance policy is often very suitable way of
providing for the future. This type of policy is found particularly in life assurance. It promotes savings by making it
compulsory which have a beneficial effect both for the individual and nation.
4. Correct distribution of cost
Insurance helps to maintain correct distribution of cost. Every business man tries to pass on to the consumer all types of
costs including accidental and losses also. In the various fields of Insurance such losses are correctly estimated keeping in
view a vast number of factor bearing on them. In the absence of insurance these losses and costs would be assessed and
distributed only by guess work.
5. Source of credit
Modem business depends largely on credit; insurance has contributed 'a lot in this regard. A life insurance policy increases
the credit worthiness of the assured person because it can provide funds for repayment if he dies. Credit extension is also
obtained by means of various kinds of property insurance. A businessman who stock of goods has been properly insured can
get credit easily. Similarly marine insurance is an essential requirement for every transaction of import and export.
6. Reduction of the chances of loss
Insurance companies spend large sums of money with a view to finding out the reasons of fire accidents, theft and robbery
and suggest some measures to prevent them. They also support several medical programme in order to make the public
safety minded. Without such losses preventive activities of insurance companies, the chances of loss would have been
greater than they are at present days.
7. Solution of social problems
Insurance serves as a useful device for solving complex social problems e.g. compensation is available to victims of
Industrial injuries and road accident while the financial difficulties arising from old age, disability or death are minimized. It
thus enables many families and business units to continue intact even after a loss.
8. Productive utilization of fund
Insurer accumulates large resources from the various insurance funds. Such resources are generally invested in the country,
either in the public or private sector. This facilitates considerably in over all development of the economy.
9. Insurance as an investment
A life policy is a combination of protection and investment which serves a useful purpose. The premium that the insured
pays go on accumulating in a fund every year. The sum so accumulated by the insurance company earns interest. Under life
assurance a person may also invest his capital in a annuity which will pay him an income every year till death. Therefore,
insurance may be regarded as an investment.
10. Promotion of international trade
The growth of the international trade of the country has been greatly helped by shifting of risk to insurance company. A ship
sailing in the sea faces some miss-fortune. A fire breaks out and burns to ashes all the merchandise of a business man. But
insurance is one of the devices by which these risks may be reduced or eliminated. So industrialists and exporter may devote
their full attention toward the promotion of business which may increase the export activities.
11. Removing fear
Insurance helps to remove various types of fear from the mind of the people. The insured is secured in the knowledge that
the protection of the insurance fund is behind him if some sad event happens. It thus creates confidence and eliminates
worries which is difficult to evaluate, but the benefit is very real.
12. Favourable allocation of factors of production
Insurance also helps in achieving favourable allocation of the factors of production. Capital is usually shy in the risky
business. People hesitate to invest their capital where financial losses are great. If protection is provided against these risks
by means of insurance, several investors will become ready to invest their funds in those fields.
13. Growth of Business competition
Insurance enables the small business units to compete upon more equal terms with the bigger organization. Without
insurance it would have been impossible to undertake the risks themselves. On the other side bigger organization could
absorb, their losses due to great financial strength. Moreover insurance removes uncertainty of financial losses arising out of
the certain causes. It thus increases knowledge which is one of the most important preconditions of perfect competition.
14. Employment opportunity
Insurance provides employment opportunity to jobless persons which is helpful for the improvement and progress of social
condition

15. Miscellaneous benefits

(i) It establishes the relation between the employed and employer by providing various facilities i.e. group life insurance,
social security scheme, retirement income plan, workman's compensation insurance.
(ii) Insurance creates the confidence and sense of security among the policy holder.
(iii) Insurance company provides valuable services of skilled and expert persons to industries and business in order to
eliminate various risks.
(iv) It promotes economic growth and development. This would be impossible in the absence of insurance.
(e) It contributes to the efficiency of business and also industrial and commercial executives.
(f) Security of dependents is made possible through life assurance. It gives relief to helpless families after the death of the
earning member of the family.