INSURANCE

CONTENT

1. Definition of Insurance
2. The Difference between Insurance and Assurance
3. The History of Insurance
4. Basic Principles of Insurance

Definition of Insurance

Insurance can be defined as a method of protecting a person, a business or some other form of organization against financial loss resulting from damage to theft of personal and business assets(general insurance) and against injury and death (accident and life insurance)

Insurance can also be defined as a legal contract in which one party undertakes to indemnify another party against damage, loss or liability, resulting from the occurrence of uncontrollable events. It is one of the aids to trade that relieves businesses of some risk of being in business and releases capital in case of emergency.

There are man-made risks and natural risks. Some risks are insurable while others are not insurable. Insurance works on the principle of pooling risks. The premium (contributions) of many clients is pooled together and the losses of few clients are compensated from the pool.

The Difference between Insurance and Assurance

At one time ‘insurance’ and ‘assurance’ had different meaning but today this difference is less important but the word ‘assurance’ is still often used in relation to life policies.