Live Market Watch
Insurance

Basics of Insurance

Meaning of Insurance
Insurance provides financial protection against a loss arising out of happening of an uncertain event. A person can avail this protection by paying premium to an insurance company. 
A pool is created through contributions made by persons seeking to protect themselves from common risk. Premium is collected by insurance companies which also act as trustee to the pool. Any loss to the insured in case of happening of an uncertain event is paid out of this pool.
Insurance works on the basic principle of risk-sharing. A great advantage of insurance is that it spreads the risk of a few people over a large group of people exposed to risk of similar type.

Definition 
Insurance is a contract between two parties whereby one party agrees to undertake the risk of another in exchange for consideration known as premium and promises to pay a fixed sum of money to the other party on happening of an uncertain event (death) or after the expiry of a certain period in case of life insurance or to indemnify the other party on happening of an uncertain event in case of general insurance. 
The party bearing the risk is known as the ’insurer’ or ’assurer’ and the party whose risk is covered is known as the ’insured’ or ’assured’.

Concept of Insurance / How Insurance Works
The concept behind insurance is that a group of people exposed to similar risk come together and make contributions towards formation of a pool of funds. In case a person actually suffers a loss on account of such risk, he is compensated out of the same pool of funds. Contribution to the pool is made by a group of people sharing common risks and collected by the insurance companies in the form of premiums. 

 

WHY SHOULD I BUY INSURANCE?

All assets have some economic value attached to them. No person can deny that there is also a possibility that these assets may get damaged/destroyed or become non-operational due to risks like breakdowns, fire, floods, earthquake etc. Different assets are exposed to different types of risks like a car has a risk of theft or meeting an accident, a house is exposed to risk of catching fire, a human is exposed to risk of death/accident. Insurance is needed because of following reasons:
Social Security Tool 
Insurance acts as an important tool providing a sense of security to the society on a whole. It is the right of every human-being to have basic amenities like food, clothing, housing, medical care, standard of living necessary for his personal and family’s well being, and right to security in case of unemployment, disability, sickness or any other circumstances out of his control.
In case the bread earner of a family dies, the family suffers from direct financial loss as family’s income ceases. As a result, family’s economic condition gets affected unless there are other arrangements to rescue the family from this situation. Life insurance is one alternate arrangement that offers some respite to the family from financial distress. Otherwise this family would have been pushed into the lower strata of the society, which would be an additional cost to the society. This is because subsidies would have to be given to the family so as to enable it to survive and enjoy the basic rights at par with other people. Moreover, a poor family is generally seen to have a large family size with family members being illiterate. This on a whole affects the society and is a cost to the society. Therefore, insurance compliments the state in social management efforts. 
Uncertainty
The basic need of insurance arises as risks are uncertain and unpredictable in nature. Getting insurance for an asset does not mean that the asset is protected against risks or its exposure to risk is reduced, but it actually implies that in case the asset suffers any loss in value due to such risk, the insurance company bears the loss and compensates the insured by making payment to him. 
Economic Development
The premium paid by people to the insurance companies is a part of their savings. Insurance, thus, acts as a useful instrument in promoting savings and investments, particularly within the lower-income and middle-income families. These savings are ultimately used as investments fuelling economic growth. 
General Purposes of Insurance
Insurance is widely popular and beneficial because of its following general purposes:

  • Protection or safety (Term insurances) : These plans are best suited for people aged upto 35 years as it provides higher protection at low cost. These plans are also beneficial for a person whose income is low and want to secure their family from financial default in case of his death.
  • Marriage or education of the child (Children plans)
  • Speedy growth of money & risk cover (Unit Linked Plans)
  • Saving and Protection (Endowment type plans)

Saving, protection & liquidity (Money back plans)The above purposes apply for life insurance. In case of General insurance the basic purpose is to protect the insured against financial loss suffered by him or creation of liability, due to the causes covered by the policy.

Schedule a Meeting With Us

Name
Email
Mobile
City
Captcha Code 

IPO News


Subscribe to Embassy Office Parks REIT: Choice Broking Choice Broking has come out with its report on Embassy Office Parks REIT. The research firm has recommended to "Subscribe" the IPO in its research report as on March 16, 2019
Mon, 18 Mar 2019 16:19:20 +0530


Subscribe to Embassy Office Parks REIT: ICICI Direct ICICI Direct has come out with its report on Embassy Office Parks REIT. The research firm has recommended to "Subscribe" the IPO in its research report as on March 18, 2019
Mon, 18 Mar 2019 15:54:32 +0530


Embassy Office Parks REIT IPO opens: 10 things you should know Post the utilisation of the IPO proceeds, its total indebtedness is expected to be less than 15 percent of market value initially.
Mon, 18 Mar 2019 10:16:49 +0530


Embassy Office Parks REIT raises Rs 1,743 cr, Radhakishan Damani among anchor investors Ace investor and Avenue Supermarts#39; owner Radhakishan Damani and his brother are among Indian investors, who invested Rs 160 crore against 53.36 lakh shares in Blackstone-backed company, through their five trusts
Sun, 17 Mar 2019 16:45:10 +0530


Subscribe to MSTC Ltd: Choice Broking Choice Broking has come out with its report on MSTC Ltd. The research firm has recommended to "Subscribe" the IPO in its research report as on March 12, 2019
Fri, 15 Mar 2019 12:03:33 +0530


State-owned MSTC#39;s Rs 226-cr IPO opens today; should you subscribe? The company will get the first mover advantage on account of domain expertise in providing e-commerce services thereby helping to boost its business. It has a robust, advanced and scalable technology platform.
Wed, 13 Mar 2019 10:07:57 +0530


Neogen Chemicals gets Sebi#39;s go ahead for IPO With this, the total number of company getting Sebi#39;s clearance for the public issues -- initial public offer (IPO) and follow on public offer (FPO) -- has reached to seven, so far in the new year.
Tue, 12 Feb 2019 11:25:06 +0530


Reliance General Insurance files for IPO The IPO will also include an offer by Reliance Capital to sell up to 79.5 million shares, Reliance Capital said.
Tue, 12 Feb 2019 10:30:01 +0530