a defensive measure used against future conditional losses to hedge the possible risks of the future. It is a legal contract that protects a person from contingent risk of losses through financial means and provides a means for individuals and societies to handle some of the risks faced in daily life.
the contracts of insurance that are provided by insurance companies. Premium the regular amount charged from customers by the insurance companies, which is paid back, either in part, or entirety, to the customers in case of a definite loss.
Reasons for Insurance: Sometimes in life it is not possible to avoid the losses. For example People may become ill. They may die of illness or accidents or their homes or other property may undergo damage or theft. So in all these cases and they have to face the loss of income or savings. So insurance is a manner of financially insuring that if such an incident comes about then the loss does not affect the present well being of the person.
Importance of Insurance: Insurance plays an important role in sharing the risks of people in an affordable form. It helps the people to quickly recover from damages and losses. Not only does it serve the ends of individuals, or of special groups of individuals, it tends to pervade and to transform our modern social order, too. The role and importance of insurance, here, has been discussed in three phases: (i) uses to individual, (ii) uses to a special group of individuals, viz., to business or industry, and (iii) uses to the society.
Uses to an individual :
1. Insurance provides security and safety.
2. Insurance affords peace of mind.
3. Insurance protects mortgaged property.
4. Insurance eliminates dependency.
5. Life insurance encourages saving.
6. Life insurance fulfills the needs of a person.
Uses to business :
1. Uncertainty of business losses is reduced.
2. Business-efficiency is increased with insurance.
3. Key Man
References: http://EzineArticles.com/?expert=Sadaf_Shahid http://www.preservearticles.com/2012040629929/what-is-the-role-and-importance-of-insurance.html http://www.letslearnfinance.com/features-of-insurance.html http://en.wikipedia.org/wiki/Insurance_policy http://en.wikipedia.org/wiki/Insurance_policy http://www.investopedia.com/erms/i/insurance-coverage.asp http://articles.economictimes.indiatimes.com/2011-07-20/news/29794993_1_life-insurance-policy-insurance-plan