INSURANCE FUNDAMENTALS
Insurance is a social device for spreading the chance of financial loss among a large number of
people. By purchasing insurance, a “person” shares risk with a group of others, thereby reducing
the individual potential for disastrous financial consequences. Transacting insurance includes
soliciting insurance, collecting premiums and handling claims.
By insurance a person can protect himself and his dependents from loss arising from future
uncertain events like fire, accidents, early death and so on. Thus, the risk is not averted but the
loss on the occurrence is shared by the members. The function of insurance is to spread this loss
over a large number of persons through the mechanism of co-operation.
Advantages of insurance or Importance of insurance
Insurance is a great and progressing industry. Importance of insurance is much more in under
developed country as indicated by the following advantages of insurance to the different groups
Advantages of Insurance to Business
1. Means of Economic Security
2. Insurance increase business efficiency
3. It enhances credit
4. Business Continuation
5. Welfare of Employee
6. Helps in establishing International Trade
Advantages of Insurance to Individual
1. Insurance provide Security and safety
2. Insurance eliminate dependency
3. Insurance protects mortgaged property
4. Life Insurance promote saving
, 5. Exemption from Tax.
6. Insurance provide profitable investments
Advantages of Insurance to the society
1. Source of Employment
2. Wealth of the society is protected
3. Reduction in inflation
4. Economic growth of the country
5. Capital Formation
NATURE OF INSURANCE
The purpose of any insurance is to provide economic protection against the losses that may be
incurred due to chance events such as:
1. Death
2. Disability
3. Medical expenses
4. Home or automobile damage, etc.
One party (the insurer), for a set amount of money (premium), agrees to pay the other party (the
insured or beneficiary), a sum of money (benefit) upon the occurrence of an event which may or
may not occur, during the effective time of the contract, which is called a policy.
Insurance is a social device for spreading the chance of financial loss among a large number of
people. By purchasing insurance, a “person” shares risk with a group of others, thereby reducing
the individual potential for disastrous financial consequences. Transacting insurance includes
soliciting insurance, collecting premiums and handling claims.
By insurance a person can protect himself and his dependents from loss arising from future
uncertain events like fire, accidents, early death and so on. Thus, the risk is not averted but the
loss on the occurrence is shared by the members. The function of insurance is to spread this loss
over a large number of persons through the mechanism of co-operation.
Advantages of insurance or Importance of insurance
Insurance is a great and progressing industry. Importance of insurance is much more in under
developed country as indicated by the following advantages of insurance to the different groups
Advantages of Insurance to Business
1. Means of Economic Security
2. Insurance increase business efficiency
3. It enhances credit
4. Business Continuation
5. Welfare of Employee
6. Helps in establishing International Trade
Advantages of Insurance to Individual
1. Insurance provide Security and safety
2. Insurance eliminate dependency
3. Insurance protects mortgaged property
4. Life Insurance promote saving
, 5. Exemption from Tax.
6. Insurance provide profitable investments
Advantages of Insurance to the society
1. Source of Employment
2. Wealth of the society is protected
3. Reduction in inflation
4. Economic growth of the country
5. Capital Formation
NATURE OF INSURANCE
The purpose of any insurance is to provide economic protection against the losses that may be
incurred due to chance events such as:
1. Death
2. Disability
3. Medical expenses
4. Home or automobile damage, etc.
One party (the insurer), for a set amount of money (premium), agrees to pay the other party (the
insured or beneficiary), a sum of money (benefit) upon the occurrence of an event which may or
may not occur, during the effective time of the contract, which is called a policy.
