Human beings face a number of risks in the world. These types of risks are not under the control of human beings because they are uncertain. To minimize this the concept of insurance emerged and the function of insurance got positive responses. It is impossible to eliminate the risk but one can reduce financial losses arising from the search on certain it through insurance. It is an important device to protect human beings from losses caused by risks.
Agency the way which provides security to the person and his property. It is a contract between two parties in which one party promises to compensate the mention losses when the next party pays the premium for a certain period of time. So it is defined as a Cooperative device of sharing the loss from the unexpected event in consideration of a premium. It covers the risk of financial losses due to death, theft, robbery, flood, Aad fire marine, etc. The company which provides such types of compensation is called an Insurance Company. It involves two parties i.e insured and insured. The person or party who pays a certain rate of premium to get compensation is called insured and the company who promised to make compensation for loss is known as the insurer. The amount which is paid to the insurance company to cover the risk is called an insurance premium.
Some important definitions of insurance
Insurance business means Life Insurance business and non-Life Insurance business which also refers to re-insurance too.Insurance act 2049
Insurance is a contract by which one party, for a compensation called a premium, agents particular risk of other party E and promises to pay to him or his nominee a certain or ascertainable sum of money on specified contingency.Edwin W. Peterson
Insurance is a Cooperative device to spread the loss caused by a particular risk over a number of persons who are exposed to it, who agree to insure themselves again the risk.Professor. RS Sharma
In conclusion, insurance is defined as a social or Cooperative device of spreading financial losses providing compensation resulting from unexpected events. It is a contract between two parties We Are One battle promises to compensate the mention value of losses to the next party in consideration of a premium.
Functions of insurance
Insurance is the contact insurer and insured that protects the insured against financial losses due to uncertain events. The major function of insurance is to spread the loss over a large number of people agreeing with the policy. Some of the functions of incidents are as follows
Insurance is a way of avoiding financial risk. The functions, which are to be provided only by the insurance company, are the primary functions. The primary functions of insurance companies are as follows:
Future is cannot be determined and eliminated at present. But financial values of risk can be reduced through Insurance. insurance provides certainty to compensate against the risk. The insurance Company promises to give financial compensation to the insured party against the mentioned loss which provides certainty.
Insurance provides protection of properties and financial losses to the insured against probable uncertain events. Insurance Company takes the boarding to provide Assurance of safety to the insured against the risk by accepting premium.
Insurance Company distributes the risk over a large number of persons or parties who are exposed to it. It provides security against the risk with the concept of sharing financial losses. It takes the financial burden and shares losses majorly with those people who involved in it through the collection of premiums.
Subsidiary functions are the other functions performed by the insurance companies like other Financial Institutions. Different types of opportunities and economic benefits are grabbed with the help of insurance. All these are accumulated with subsidiary functions. Some of them are as follows:
Mobilization of capital
Insurance companies collect a lot of money from various people as insurance premiums by inspiring life and property. Since the whole amount is not required for compensation propose, the on-utilize amount can be invested in the productive sector by providing short-term, Mid-term, and long from the loan. Thus, it mobilizes capital for the economic development of the nation.