Definition of Insurance

The term insurance can be defined in both financial and legal terms , the financial definition focuses on an arrangement that redistributes the cost unexpected losses that is , the collection of a small premium payment from all exposed and distributed to those suffering loss .

The legal definition focus on a contractual arrangement whereby on party agrees to compensate another party for losses .

The financial definition provides for the funding of the losses whereby the legal definition provides for the legally enforceable contract that spells out the legal rights , duties and obligations of all the parties the the contract .

Let’s have a look at these definitions.

In financial sense :

Insurance is a social device in which a group of individuals transfer risk on another party ( insurer) in order to combine loss experience , which permitted statistical prediction of losses and provides for payment of losses from funds contributed ( premiums) by all members who transferred risk

Bu legal sense :

A contract of insurance is a contract by which on party is consideration of the price paid to him proportionate to the risk providers security to other party that hi shall not suffer loss, damage or prejudice by the happening of certain specified events .

Insurance is meant to protect the insured against uncertain event which may cause disadvantage to him .

Life insurance however is a distinctive type insurance where there is certainty of the payment of a specified amount either on the death of the insured or an maturity of the police whichever is earlier .