Insurance: in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the insurance; an insured or policyholder is the person or entity buying the insurance policy. The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice. The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurerโs promise to compensate (indemnify) the insured in the case of a large, possibly devastating loss. The insured receives a contract called the insurance policy which details the conditions and circ*mstances under which the insured will be compensated.
General Insurance: Insuring anything other than human life is called general insurance. Examples are insuring property like house and belongings against fire and theft or vehicles against accidental damage or theft. Injury due to accident or hospitalisation for illness and surgery can also be insured. Your liabilities to others arising out of the law can also be insured and is compulsory in some cases like motor third party insurance.
Definition of Insurance
- Insurance is a cooperative form of distributing a certain risk over a group of persons who are exposed to it. โ Ghosh and Agarwal
- Insurance is a contract in which a sum of money is paid to the assured as consideration of insurerโs incurring the risk of paying a large sum upon a given contingency. โ Justice Tindall
- Insurance may be described as a social device whereby a large group ofindividuals, through a system of equitable contributions, may reduce oreliminate certain measurable risks of economic loss common to allmembers of the group. โ Encyclopedia Britannica
- Insuranceis an instrument of distributing the loss of few among many. โ Disnadle
- Thecollective bearing of risk is Insurance. โ W. Beverideges
- Aprovision which a prudent man makes against fortuitous or inevitablecontingencies, loss or misfortune. โ Thomas
- Insuranceis a device for the transfer to an insurer of certain risks of economicloss that would otherwise come by the insured. โ Allen Z. Mayerson
- Insurancehas been defined as a plan by which large numbers of people associatethemselves, to shoulders of all, risks attach to individuals. โ MageeD.H.
- Insurancemay be defined as a social device providing financial compensation forthe effects of misfortune, the payments being made from the accumulatedcontribution of all parties participating in the scheme. โ D.S. Hansell
- Insuranceby lessening uncertainty, frees the individual from same element ofrisk. โ Relph H. Wherry & Monroe Newman
- Insuranceis purchased to offset the risk resulting from hazardous which exposes aperson to loss. โ Robert I. Mehr and EmersonCammack
- Insuranceis a contract by which one party, for a compensation called the premiumassumes particular risk of the other party and promises to pay to him orhis nominee a certain or ascertainable sum of money on a specifiedcontingency. โ E.W. Patterson
Characteristics of Insurance
- It is a contract forcompensating losses.
- Premium is charged forInsurance Contract.
- The payment of Insuredas per terms of agreement in the event of loss.
- It is a contract ofgood faith.
- It is a contract formutual benefit.
- It is a futurecontract for compensating losses.
- It is an instrument ofdistributing the loss of few among many.
- The occurrence of theloss must be accidental.
- Insurance must beconsistent with public policy.
Nature of Insurance
- Sharing of Risks
- Co-operative Device
- Valuation of Risk
- Payment made oncontingency
- Amount of Payment
- Large Number ofInsured Persons
- Insurance is notgambling
- Insurance is notcharity
Functions of Insurance
Primary Function
- Provision of certaintyof payment at the time of loss
- Provision ofprotectionRisk sharing
Secondary Function
- Prevention of loss
- Provision of Capital
- Improvement ofefficiency
- Ensuring welfare ofthe Societyโฆ
Insurance, Definition of Insurance, Characteristics of Insurance, Nature of Insurance, Functions of Insurance
Insurance is a mechanism that provides financial protection to individuals or organizations against unexpected losses. It is an arrangement between two parties, the insurer and the insured, where the insurer agrees to compensate the insured for a loss in exchange for a premium. The concept of insurance has been around for centuries and has evolved over time to meet the changing needs of society.
Definition of Insurance: Insurance can be defined as a contract in which the insurer agrees to compensate the insured for a loss caused by a specific event in exchange for a premium. The event may be an accident, illness, fire, theft, or any other occurrence that causes a loss to the insured.
Characteristics of Insurance:
- Pooling of Risks: Insurance is based on the principle of pooling risks. The insurer collects premiums from a large number of policyholders and uses the money to pay for the losses of the few who suffer a loss.
- Transfer of Risks: Insurance involves the transfer of risks from the insured to the insurer. The insured pays a premium to the insurer in exchange for the insurerโs promise to pay for any loss that may occur.
- Payment of Premiums: Insurance is a contract that involves the payment of premiums. The premium is the amount the insured pays to the insurer in exchange for the insurerโs promise to pay for any loss that may occur.
- Indemnification: The purpose of insurance is to indemnify the insured for a loss. Indemnification means to put the insured back in the same financial position they were in before the loss occurred.
- Uncertainty: Insurance is based on the uncertainty of the occurrence of a loss. The insured cannot predict when a loss will occur or how much it will cost, so they purchase insurance to protect themselves.
Nature of Insurance: Insurance is a business that is based on risk management. Insurance companies use actuarial science to assess the risk of potential losses and determine the premium rates that they will charge. The nature of insurance is such that it allows individuals and organizations to transfer the risk of potential losses to an insurance company.
Functions of Insurance:
- Risk Management: The primary function of insurance is to manage risk. Insurance helps individuals and organizations to protect themselves against potential losses.
- Providing Financial Security: Insurance provides financial security to individuals and organizations by compensating them for any losses that may occur.
- Promoting Economic Growth: Insurance promotes economic growth by providing protection to businesses and individuals, which allows them to take risks and invest in new ventures.
- Spreading of Risks: Insurance spreads risks among a large group of people, which reduces the financial burden of any one individual or organization.
- Encouraging Savings: Insurance encourages savings by providing a safe and secure way to invest money.
In conclusion, insurance is an important mechanism that provides financial protection to individuals and organizations against unexpected losses. It is based on the principle of pooling risks and involves the transfer of risks from the insured to the insurer. Insurance promotes economic growth by providing protection to businesses and individuals, encouraging savings, and spreading risks among a large group of people.
Advocate in Jabalpur โ Lawyer in Jabalpur โ Ajay Gautam Advocate Jabalpur
Books written by Ajay Gautam Advocate, Author
Data Privacy Laws and Data Protection
The Time Machine Book Fiction Stories of Time Travel
Teenage Humanhood: The State or Character of Being Human
HomeSchool: Kids Story, Childrenโs Story Book with Title
The Best Romantic Love Letters Ever Written
Feelings are not Spoken but Felt: Empathy Vs. Sympathy
BrainBook: Mind Reading & Face Reading
Being Human: Questions Yourself
The Art of Debating, Persuading, Public Speaking, Arguing, Reasoning and Discussing
Say or Not Outspoken Introvert
Transform Yourself, You are what you Read
Quantum Energy Chemistry Physics Biology Science
Shark Skin Suit: Dictator Leaders of the World
Legal Eagle Lawyer: International Law and Jurisdictional Issues
Guide to Cryptocurrency, Bitcoin and Billionaires
Handbook of Research Methodology and Publication Ethics Methods and Techniques (Ph.D. UGC NET)
Renewable Energy Engineering Technology Resources of Green Energy and Civilization
Search for the Divine Prayer Yog Dhyan Mantra
UFO and Aliens Incident on Earth
- Handbook of Research Methodology and Publication Ethics Methods and Techniques (Ph.D. UGCNET)
- Real Existence ofGod
- Love Story NovelSummary
- Book: Renewable Energy Engineering Technology Resources of Green Energy and Civilization by AjayGautam
- Book: Search for the Divine Prayer Yog Dhyan Mantra by AjayGautam
- Book: UFO and Aliens Incident on Earth by AjayGautam
- Book: Guide to Cryptocurrency, Bitcoin and Billionaires by AjayGautam
- Book: Money Gain Mantra in Life by AjayGautam
- Legal Eagle Lawyer: International Law and JurisdictionalIssues
- Quantum Energy Chemistry Physics Biology Science
- Shark Skin Suit: Dictator Leaders of the World
- Transform Yourself, You are what youRead
- Say or Not OutspokenIntrovert
- The Art of Debating, Persuading, Public Speaking, Arguing, Reasoning andDiscussing
- Being Human: QuestionsYourself
- Feelings are not Spoken but Felt: Empathy Vs.Sympathy
- Indian Horror GhostStories
- The Best Romantic Love Letters EverWritten
- HomeSchool: Kids Story, Childrenโs Story Book withTitle
- Teenage Humanhood: The State or Character of BeingHuman
- The Time Machine Book Fiction Stories of Time Travel
- ๐๐๐ญ๐ ๐๐ซ๐ข๐ฏ๐๐๐ฒ ๐๐๐ฐ๐ฌ ๐๐ง๐ ๐๐๐ญ๐๐๐ซ๐จ๐ญ๐๐๐ญ๐ข๐จ๐ง
- The Perfect Time to Start Investing: A Comprehensive Guide to Building Wealth and Securing FinancialStability
- Pandit Ajay Gautam, Indian Jyotish Kundali Reading and Predictions
