Ankit bought an expensive sports car on his birthday.
Ankit was worried that the car might get damaged while he drove it on the road.
Upon talking to his friend, Ankit decided that the best way to protect his sports car and himself was to take insurance.
Insurance is a method by which people protect themselves against any loss caused by an
unexpected event.
Ankit Buys Insurance from Oriental Insurance Company
The written agreement between the insurer and insured will be legally known as an "agreement/ contract". The insurance will be known as "policy".
The person who is protected against risk is called ‘insured’ and the insurance company which protects the risk of loss is known as "insurer".
Ankit bought an insurance policy for his car that protected it against any damage, theft, accident etc.
In this case, Ankit will be called the "insured" and Oriental Insurance Company will be called the "insurer".
In return for the protection against damage and loss provided by insurer, Ankit will have to make payments to the insurance company.
Such payments are called "insurance premium". The payments have to be made according to the agreement.
Ankit Meets With an Accident
One day, Ankit decided to drive to a village that was 100km away.
While he was on his way, he met with an accident. A truck had hit his car from behind and damaged the car.
The truck driver could only pay Ankit half the cost of damage caused to the car.
Ankit remembered that his insurance policy covered accidents as well.
The insurance company compensated Ankit for the amount that he had to spend on getting the car repaired.
Let us Understand the 'Importance of Insurance"
If Ankit didn't insure his car, he will have had to pay the cost of repair and it would have been expensive.
Taking an insurance policy and paying premium allowed Ankit to avail compensation and avoid a huge expense.
Protection against damages and loss caused by unexpected events ensures that people have a more secure life.
There are many different types of insurance that protect each aspect of life- life insurance, health insurance, fire insurance etc.
Let us revise!
Insurance is an important device that is used to protect people against unexpected loss.
The person whose loss is protected is known as the "insured" and the insurance company that is providing the protection will be known as the "insurer".
The written agreement between the insurer and insured will be legally known as an "agreement/ contract". The insurance will be known as "policy".
The insured will have to pay an amount of money to the insurer as a premium. In exchange of this, the insured will be protected against any loss or damages.