Insurance,DefinitionofInsurance,CharacteristicsofInsurance,

NatureofInsurance,FunctionsofInsurance
Insurance:in law and economics, is a form of risk management primarily used to hedge
againsttheriskofacontingent,uncertainloss.Insuranceisdefinedastheequitabletransfer
of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a
companysellingtheinsuranceaninsuredorpolicyholderisthepersonorentitybuyingthe
insurancepolicy.Theinsurancerateisafactorusedtodeterminetheamounttobecharged
for a certain amount of insurance coverage, called the premium. Risk management, the
practice of appraising and controlling risk, has evolved as a discrete field of study and
practice.Thetransactioninvolvestheinsuredassumingaguaranteedandknownrelatively
small loss in the form of payment to the insurer in exchange for the insurers promise to
compensate (indemnify) the insured in the case of a large, possibly devastating loss. The
insured receives a contract called the insurance policy which details the conditions and
circumstancesunderwhichtheinsuredwillbecompensated.
General Insurance: Insuring anything other than human life is called general insurance.
Examplesareinsuringpropertylikehouseandbelongingsagainstfireandtheftorvehicles
againstaccidentaldamageortheft.Injuryduetoaccidentorhospitalisationforillnessand
surgery can also be insured. Your liabilities to others arising out of the law can also be
insuredandiscompulsoryinsomecaseslikemotorthirdpartyinsurance.
DefinitionofInsurance
Insuranceisacooperativeformofdistributingacertainriskoveragroupofpersonswho
areexposedtoit.GhoshandAgarwal
Insuranceisacontractinwhichasumofmoneyispaidtotheassuredasconsiderationof
insurers incurring the risk of paying a large sum upon a given contingency. Justice
Tindall
Insurance may be described as a social device whereby a large group of individuals,
throughasystemofequitablecontributions,mayreduceoreliminatecertainmeasurable
risksofeconomiclosscommontoallmembersofthegroup.EncyclopediaBritannica
Insuranceisaninstrumentofdistributingthelossoffewamongmany.Disnadle
ThecollectivebearingofriskisInsurance.W.Beverideges
A provision which a prudent man makes against fortuitous or inevitable contingencies,
lossormisfortune.Thomas
Insuranceisadeviceforthetransfertoaninsurerofcertainrisksofeconomiclossthat
wouldotherwisecomebytheinsured.AllenZ.Mayerson
Insurance has been defined as a plan by which large numbers of people
associatethemselves,toshouldersofall,risksattachtoindividuals.MageeD.H.

Insurance may be defined as a social device providing financial compensation for the
effectsofmisfortune,thepaymentsbeingmadefromtheaccumulatedcontributionofall
partiesparticipatinginthescheme.D.S.Hansell
Insurance by lessening uncertainty, frees the individual from same element of risk.
RelphH.Wherry&MonroeNewman
Insuranceispurchasedtooffsettheriskresultingfromhazardouswhichexposesaperson
toloss.RobertI.MehrandEmersonCammack
Insurance is a contract by which one party, for a compensation called the
premium assumes particular risk of the other party and promises to pay to him or his
nominee a certain or ascertainable sum of money on a specified contingency. E.W.
Patterson
CharacteristicsofInsurance
Itisacontractforcompensatinglosses.
PremiumischargedforInsuranceContract.
ThepaymentofInsuredaspertermsofagreementintheeventofloss.
Itisacontractofgoodfaith.
Itisacontractformutualbenefit.
Itisafuturecontractforcompensatinglosses.
Itisaninstrumentofdistributingthelossoffewamongmany.
Theoccurrenceofthelossmustbeaccidental.
Insurancemustbeconsistentwithpublicpolicy.
NatureofInsurance
SharingofRisks
C0operativeDevice
ValuationofRisk
Paymentmadeoncontingency
AmountofPayment
LargeNumberofInsuredPersons
Insuranceisnotgambling
Insuranceisnotcharity
FunctionsofInsurance
PrimaryFunction
Provisionofcertaintyofpaymentatthetimeofloss

ProvisionofprotectionRisksharing
SecondaryFunction
Preventionofloss
ProvisionofCapital
Improvementofefficiency
EnsuringwelfareoftheSociety