Insurance is a means of protection from financial loss. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of loss, from one entity to another, in exchange for payment.
Insurance is essentially an arrangement where the losses experienced by a few are extended among many who are exposed to similar risks. It is a protection against financial loss that may occur due to an unexpected event. The transaction involves the insured assuming a guaranteed and known, relatively small, loss in the form of payment to the insurer in exchange for the insurer’s promise to compensate or indemnify the insured in case of a large, possibly devastating loss. The insured receives a contract called an Insurance Policy which details the conditions and circumstances under which the insured will be compensated.
Insurance can be classified broadly into-
a) Life Insurance
b) Health Insurance
c) General Insurance