Insurance

Answer: Insurance is a contract in which the insurer agrees, in return for a premium, to compensate the insured for a loss caused by a specified risk or to pay a fixed sum on the happening of an event.

The insured pays a consideration called the premium; the document of contract is the policy. Insurance works on the principle of sharing risk: the losses of a few are spread over many who pay premiums. It is based on principles such as utmost good faith, insurable interest, indemnity, subrogation, contribution, proximate cause and mitigation of loss. Main types are life insurance and general insurance (fire, marine, health, motor and so on). It protects business from financial loss and gives a sense of security.