Business Law

Insurance is a means for persons and businesses to protect themselves against the risk of loss. An individual who purchases automobile insurance may be reimbursed by the insurer if his or her car is stolen. Insurance is crucial to personal, business, and estate planning.
Insurance is defined as a contract whereby one party undertakes to identify another against loss, damage or liability arising from an unknown event. It is a means of transferring and distributing risk of loss. The risk of loss is spread among all parties or insureds who pay premium to a particular insurance company. The insurance company, also called the insurer or underwriter is the obligated to pay insurance proceeds to those members of the pool who experience losses.
The insurance contract is called a policy. The maximum amount that the insurer agrees to pay in case of a loss is known as the face of the policy and the money paid to the insurance company is called a premium. Premiums are based on an estimate of the number of parties within the pool who will suffer the risks insured against. The estimate is based on past experience. Sometimes an insurer will spread the risk of loss through reinsurance. That is, it will sell a portion of the policy’s risk and right to receive premiums to other insurance companies called reinsurers.
Insurance policies are often sold by insurance agents or brokers. An insurance agent usually works exclusively for one insurance company and is an agent of that company. An insurance broker is an independent contract who represents a number of insurance companies. The broker is the agent of the insured. Some insurance is sold directly by the insurer to the insured. In life insurance, the person who will receive the benefits or the proceeds of the policy is known as the beneficiary.
The danger of a loss of, or injury to, property, life, or anything else, is called a risk or peril; when the danger may be covered by insurance, it is known as the insurable risk. Factors such as fire, floods, and sleet, which contribute to the uncertainty, are called hazards.
A rider on an insurance policy is a clause or even a whole contract added to another contract to modify, extend, or limit the base contract. A rider must be clearly incorporated in, attached to, or referred to in the policy so that there is no doubt the parties wanted it to become a part of the policy.

Insurance agents customarily have the authority to issue a binder, or a temporary contract of insurance, until the company investigates the risk and issues a formal policy.

Insured Asset
An asset with an insurance policy of any kind. That is, an insured asset is one for which an insurance company must compensate the owner if the asset is damaged or destroyed. Most companies have insurance policies on their assets, or at least their tangible assets, to transfer the risk associated with owning them. Likewise, most individuals have insurance policies on their major assets, such as their houses and cars.

Personal Insurance
Insurance of human life values against the risk of death, injury, illness or against expenses incidental to the latter
Insurance purchased for the personal purposes or family protection purposes as contrasted with insurance of business property or interests

Definition of 'Property Insurance'
A policy that provides financial reimbursement to the owner or renter of a structure and its contents, in the event of damage or theft. Property insurance can include homeowners insurance, renters insurance, flood insurance and earthquake insurance.

Business Insurance
A form of insurance to protect a business against the loss of services of a key employee or employees. Usually accident and sickness, however, life insurance may also form part of the package. Also called Partnership Insurance or Corporation Insurance.