1. What is Insurance?

Insurance is a financial product sold by insurance companies to safeguard you and /

or your property against the risk of loss, damage or theft (such as flooding, burglary
or an accident).
Some types of insurance you have to take out by law such as motor insurance if you
drive a vehicle; some you may need as a condition of a contract such as buildings
insurance as a requirement of your mortgage; and others are sensible to take out
such as life insurance or saving for a pension.
While it is a good idea to make sure you are not paying for insurance that you don’t
need, you should always think about what would happen if disaster struck and you
didn’t have cover to protect you.
You can buy insurance policies for many aspects of your life, for example for your
health, home, car, business, or retirement.
An insurance policy is the contract that you take out with an insurer to protect you
against specific risks under agreed terms.

2. How insurance works

When you buy a policy you make regular payments, known as premiums, to the
insurer. If you make a claim your insurer will pay out for the loss that is covered
under the policy.
If you don’t make a claim, you won’t get your money back; instead it is pooled with
the premiums of other policyholders who have taken out insurance with the same
insurance company. If you make a claim the money comes from the pool of
policyholders’ premiums.
Example : Suppose ‘A’ got an insurance worth 1200 for which he pays a premium of
100 per month and now say he has a claim for same amount for 1200 in 1 year than
same would be used from his premium. Now if he has a claim before that it will be
paid by the insurer and he will have to pay the premium after that

3. Types of Insurances

a. Life Insurance
b. General Insurance

What is Life Insurance?

Life insurance is a contract that offers financial compensation in case of death or
disability. Some life insurance policies even offer financial compensation after
retirement or a certain period of time. Life insurance, thus, helps you secure your
family’s financial security even in your absence. You either make a lump-sum
payment while purchasing a life insurance policy or make periodic payments to the
insurer. These are known as premiums. In exchange, your insurer promises to pay
an assured sum to your family in the event of death, disability or at a set time

What is General Insurance?

A general insurance is a contract that offers financial compensation on any loss
other than death. It insures everything apart from life. A general insurance
compensates you for financial loss due to liabilities related to your house, car, bike,
health, travel, etc. The insurance company promises to pay you a sum assured to
cover damages to your vehicle, medical treatments to cure health problems, losses
due to theft or fire, or even financial problems during travel.
Simply put, a general insurance offers financial protection for all your assets against
loss, damage, theft, and other liabilities. It is different from life insurance.
You can get almost anything and everything insured. But there are five key types
available:
1. Health Insurance
2. Motor Insurance
3. Travel Insurance
4. Home Insurance
5. Fire Insurance

4. Benefits of insurance?

Insurance benefits individuals, organizations and society in more ways than the average
person realizes. Some of the benefits of insurance are obvious while others are not.

1. The obvious and most important benefit of insurance is the payment

of losses. An insurance policy is a contract used to indemnify
individuals and organizations for covered losses.
2. The second benefit of insurance is managing cash flow
uncertainty. Insurance provides payment for covered losses when
they occur. Therefore, the uncertainty of paying for losses out-of-
pocket is reduced significantly.
3. A third and uncommon benefit of insurance is complying with legal
requirements. Insurance meets statutory and contractual
requirements as well as provides evidence of financial resources.
4. Another very important benefit of insurance is promoting risk
control activity. Insurance policies provide incentives to implement
a loss control program because of policy requirements and premium
savings incentives.
5. The fifth benefit of insurance is the efficient use of an insured's
resources. Insurance makes it unnecessary to set aside a large
amount of money to pay for the financial consequences of the risk
exposures that can be insured. This allows that money to be used
more efficiently.
6. Another uncommon, important benefit of insurance is support for the
insured's credit. Insurance facilitates loans to individuals and
organizations by guaranteeing that the lender will be paid if the
collateral for the loan is destroyed or damaged by an insured
event. This reduces the lender's uncertainty of default by the party
borrowing funds.
7. The seventh benefit of insurance is it provides a source of
investment funds. Insurance companies collect premiums up front,
invest those premiums in a variety of investment vehicles, and pay
claims if they occur.
8. The last benefit of insurance is reducing social burden. Insurance
helps reduce the burden of uncompensated accident victims and the
uncertainty of society.