What is Insurance? Meaning, Definition of Insurance

What is Insurance?

What is Insurance are given in the diagram below.↓

What is Insurance

Image credits © Manoj Patil.

Risk is involved in all aspects of life and business. In Human being risk involved are losses of earning member in the family or his disability or loss of job, or loss of property due to natural or human calamities, e.g. robbery, theft, floods, cyclones, fire, etc. In business risks involve are variations in prices, natural risks, behind time transport risks, shortage of raw material risk, risk of late payments of goods, etc. Every businessman should adopt particular measures to minimize or to reduce the possibility of risks. He should save a specific amount of profit every year from his business to secure himself, by entering into an insurance contract. Insurance covers the risk, but it does not prevent the risk. Insurance is really an element of business, without it, no vehicle of transport, in sea or land or in the air is allowed to move, nothing built and no wheel turns. Every wise businessman secures himself to insurance.

Meaning of Insurance

Meaning of Insurance is given in the diagram below.↓

Meaning of Insurance

Image credits © Manoj Patil.

Insurance is a contract entered between two parties, i.e. the company assuring in the contract of insurance to compensate is known as insurer / assurer. While the person to whom such assurance is given is known as insured / assured. In this contract, the insurer is liable to compensate for the specific loss to the insured who has paid regular consideration, i.e. an insurance premium.

Definition of Insurance

According to Insurance Act of 1938, Insurance is defined as follows: ↓

“Insurance is defined as "A provision which prudent man makes against inevitable contingencies”.

Definition of Insurance are given in the diagram below.↓

Definition of Insurance

Image credits © Manoj Patil.

Definition of Insurance is follows:

  1. Proposal,
  2. Insurance Policy,
  3. Insurer,
  4. Insured,
  5. Premium,
  6. Risk,
  7. Subject matter of insurance,
  8. Claim,

Definition of Insurance are:

  1. Proposal: It is a written request by the proposer (insured) to the insurance company to issue insurance policy.
  2. Insurance Policy: This is the document containing the terms & conditions of contract of insurance.
  3. Insurer: The organization which agrees to pay money for compensating the losses is call insurer or assurer.
  4. Insured: The person who is insured is called the insured or the assured.
  5. Premium: The regular consideration paid by the insured to insurer.
  6. Risk: Happening of a contingency against which insurance is affected.
  7. Subject matter of insurance: It refers to the subject against which the policy is taken.
    • In Life Insurance, the life of the assured is a subject matter.
    • In Fire Insurance, the goods and assets or property of the insured is the subject matter.
    • In Marine Insurance, the cargo or ship is the subject matter.
  8. Claim: It is the demand made by the insured on the insurer to compensate for loss on happening of the event.

Some important articles on insurance policies are given below.

Principles of Insurance - Basic Principles of Insurance - Diagram

Types of Life Insurance Policies Life Insurance Definition Meaning

Types of Fire Insurance Polices - Meaning and Definition of Fire Insurance

Types of Marine Insurance Policies - Importance, Conditions of Marine Insurance policies

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