- We face risks of death and disability for human life; fire and burglary risk for property; storms of the sea for shipment of goods and, so on.
- If any of these takes place, the individuals and/or, organisations may suffer a great loss, sometimes beyond their capacities to bear the same.
- It is to minimise the impact of such uncertainties that there is a need for insurance.
- Insurance is a contract under which the insurance buyer agrees to pay a certain fee for protecting it against various risks. This fee is paid to the insurance company. In return, in case of damage of the insured property, the insurance company pays a percentage of the amount to the risk bearer.
- In the end, insurance is a form of risk management.
- Insurance is issued under good faith from the both parties. This is because all information should be disclosed by the customer to the insurer. The insurance company should make sure the customer is aware of terms and condition of the insurance contract.
- The functions of insurance are of providing certainty, protection, and risk sharing.