What Is Insurance

Insurance in simple terms can be defined as a contract or policy between one entity called as insured which receives financial protection; an agreed amount of money from another entity called as insurer against potential hazards or losses to its property, life, business etc. This reimbursement is done fully or partially depending on the terms and conditions mentioned in the insurance policy. Profits are generated by the insurers which are basically insurance companies from the premiums (money) received from insurer which can be an individual or a company. Once insured, insuring companies’ guarantees reimbursement in the form of money called as insurance claim to the other entity in the event of loss. Any quantifiable risks like business, auto, life, health etc can be insured. Thus small contributions in the form of premium made by large number of people are used in claims payment for losses incurred by one or many giving the affected individual a chance to restore his/her financial status. You can also read the history of insurance

Benefits of Insurance

Advantage of having insurance can be best thought when the consequences of not being insured are considered. Think of following cases; fire breaks out in a company damaging all the machineries, a house demolished because of a strong earthquake, car getting severely damaged due to a major collision etc. In all these unforeseen calamities whether natural or caused by human; non-insured property would’ve made an individual, a bankrupt. But the same situation can be easily avoided if everything is insured. Reimbursement from the insurance company would help in re-building or establishing the entire belongings from the start.  Hence insuring property, car, life etc. by paying small amount of money called as insurance premiums eventually helps in reducing losses, relieving from fear of losing belongings and securing the same. Moreover, the premiums collected are used for country’s growth as investments are done in helping government, commerce, infrastructure resulting in a economically strong nation.

Listed below are the few advantages of having an insurance policy. Although the benefits vary according to the type of insurance you take:

1) Risk Coverage: In case of your unexpected death, house damage, business loss; you won’t face the burden of going bankrupt and continue living peacefully.
2) Attractive Tax Benefits: Almost all insurance companies; provide tax benefits during the start and exit of policy.
3) Buying Power: People irrespective of their financial condition can purchase expensive day-to-day things like expensive cars, plush houses etc. as insured people get compensated during damage to any of these.