Insurance

Insurance is a way to manage your risk. When you buy insurance, you purchase protection against unexpected financial losses. The insurance company pays you or someone you choose if something bad happens to you. If you have no insurance and an accident happens, you may be responsible for all related costs.


Benefits of insurance

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. The second benefit of insurance is managing cash flow uncertainty. Insurance provides payment for covered losses when they occur.


7 Types of Insurance are; Life Insurance or Personal Insurance, Property Insurance, Marine Insurance, Fire Insurance, Liability Insurance, Guarantee Insurance.


Insurance policies can cover up medical expenses, vehicle damage, loss in business or accidents while traveling, etc. Life Insurance and General Insurance are the two major types of insurance coverage. General Insurance can further be classified into sub-categories that clubs in various types of policies.


Insurance in India can be broadly divided into three categories:

  • Life insurance. As the name suggests, life insurance is insurance on your life. ... 
  • Health insurance. Health insurance is bought to cover medical costs for expensive treatments. ... 
  • Car insurance. ... 
  • Education Insurance. ... 
  • Home insurance.

In the case of the Insured Event, the Insurer shall compensate the affected party for the property or health damage for which the Insured is liable, i.e. pay the costs of the Insured associated with the return of the situation to the previous condition.


Advantages of insurance:
  • Providing Security: ADVERTISEMENTS: ... 
  • Spreading of Risk: The basic principle of insurance is to spread risk among a large number of people. ... 
  • Source for Collecting Funds: ADVERTISEMENTS: ... 
  • Encourage Savings: ... 
  • Encourage International Trade
The characteristics of insurance is discussed under the following heads:
  • A CONTRACT: ... 
  • UNDERTAKING OF RISK: ... 
  • A COOPERATIVE DEVICE: ... 
  • PAYMENT OF POLICY AMOUNT ON THE HAPPENING OF EVENTS: ... 
  • PREMIUM: ... 
  • CONTRACT OF ADHESION: ... 
  • DEVELOPMENT OF LARGER INDUSTRIES: ... 
  • PROVIDE PROTECTION

• Kinds of insurance
Property insurance
Two main types of contracts—homeowner’s and commercial—have been developed to insure against loss from accidental destruction of property. These contracts (or forms) typically are divided into three or four parts: insuring agreements, identification of covered property, conditions and stipulations, and exclusions.

Insurance companies

Mutual versus proprietary : 
Insurance companies are generally classified as either mutual or proprietary companies.Mutual companies are owned by the policyholders, while shareholders (who may or may not own policies) own proprietary insurance companies.

Demutualization of mutual insurers to form stock companies, as well as the formation of a hybrid known as a mutual holding company, became common in some countries, such as the United States, in the late 20th century. However, not all states permit mutual holding companies.


Reinsurance companies : 
Reinsurance companies are insurance companies that sell policies to other insurance companies, allowing them to reduce their risks and protect themselves from substantial losses.


Insurance consultants
There are also companies known as "insurance consultants". Like a mortgage broker, these companies are paid a fee by the customer to shop around for the best insurance policy among many companies. Similar to an insurance consultant, an "insurance broker" also shops around for the best insurance policy among many companies. However, with insurance brokers, the fee is usually paid in the form of commission from the insurer that is selected rather than directly from the client.

Neither insurance consultants nor insurance brokers are insurance companies and no risks are transferred to them in insurance transactions. Third party administrators are companies that perform underwriting and sometimes claims handling services for insurance companies. These companies often have special expertise that the insurance companies do not have.





Does not reduce the risk

Insurance is just a risk transfer mechanism wherein the financial burden which may arise due to some fortuitous event is transferred to a bigger entity called an Insurance Company by way of paying premiums. This only reduces the financial burden and not the actual chances of happening of an event. Insurance is a risk for both the insurance company and the insured. The insurance company understands the risk involved and will perform a risk assessment when writing the policy.



In 2020 there were 5,929 insurance companies in the U.S. (including territories), according to the National Association of Insurance Commissioners. This number includes: P/C (2,476 companies), life/annuities (843), health (995), fraternal (81), title (62), risk retention groups (245) and other companies (1,227).