In simple sense, insurance is the assurance of financial protection of the people and the society for their loss. These days, insurance is being done by many people and it is getting popular. It is a provision of transfer of risks from the insured to insurer.
The insurance companies are those non-banking financial mediators that provide financial protection to the society. The objective of these insurance companies is to eliminate certain financial risks for the individuals. They offer protection to the investor by providing compensation for monetary losses caused by unmanageable losses.
The loss amount is bearded not only by the individuals who meet the catastrophe so, the insurance business is guided by the principal of large number of participants in system so that the premium collected is adequate for the loss connected with the insured belongings.
Why is insurance important?
Insurance can expand the predictable and the unpredictable risks that occur. It also makes the people in the society free from worry and fear since they provide protection provision for them. It energetically involves in many loss-protecting agenda such as: fire provision, health provision, vehicle provision and sea provision, theft provision and so on. Insurance helps aid acknowledgment by protecting guarantee pledged to secure loans. It also collects small amount of money from many insurance purchasers and group it to make large blocks of funds available in the capital marketplace.
What are the types of insurance policies?
There are three types of insurance policies which are:-
1. Term life insurance: This policy is issued for a short period of time, generally one year. If the insured person dies while the policy is intact, the benefactor of the policy gets the death benefit but if s/he does not die within that time phrase, the policy becomes worthless and creates no value. There is no need of savings price for this kind of policy.
2. Whole life insurance policy: It is also called cash-value or permanent or ordinary or investment life insurance. It is the customary form of insurance. It is valid for the whole life of a person. The premium should be done only once or throughout or for a certain period of time. The death benefit is only given when the insured dies.
3. Fixed premium insurance: This policy has a fixed time period. Here, if the insured dies before the expiration date they get the total benefit despite their death time period. There is no risk of losing benefits because of early death. The insured has to pay the equal premium amount for specified time period, which is usually for ten years.
