Insurance, however, provides protection only against tangible losses. It cannot ensure continuity of business, market share, or customer confidence, and cannot provide knowledge, skills, or resources to resume the operations after a disaster.
Basically, it’s a legal agreement between two parties i.e. the company (insurer) and the individual (insured). In this, the company promises to make good the losses of the insured on happening of the insured contingency. The contingency is the event which causes a loss. It can be the death of the policyholder or damage/destruction of the property.
It’s called a contingency because there’s an uncertainty regarding happening of the event. The insured pays a premium in return for the promise made by the insurer.
How does insurance work?
The insurer and the insured get a legal contract for the insurance, which is called the policy. The policy has details about the conditions and circumstances under which the company will pay out the insurance amount to either the insured person or the nominees.
It is a way of protecting yourself and your family from a financial loss. Generally, the premium for a big coverage is much lesser in terms of money paid.
The company takes this ‘’risk’’ of providing a high cover for a small premium because very few insured people actually end up claiming the loss. This is why you get It for a big amount at a low price.
Any individual or company can seek the coverage from an company, but the decision to provide coverage is at the discretion of the company.
The company will evaluate the claim application to make a decision. Generally, companies refuse to provide insurance to ‘’high-risk’’ applicants.
Types of insurance
- Term Life
- Money-back policy
- Unit-Linked Insurance Plan
- Pension Plans
Apart from the safety and security benefits of buying coverage, there are also the income tax benefits that you can avail.
Be it life, health or general insurance, you can buy a policy offline as well as online. Just like there are ‘’agents’’ who will help you buy a policy, there are websites as well that you can buy a policy from. Ensure that you have done your research before choosing and investing in an insurance policy.