MEANING OF INSURANCE
Insurance can be defined as an arrangement by a person, a trader, group of individuals to protect life and property against loss. The decision to take u insurance is in recognition that life and mans activities are prone to risks and uncertainties. For instance a newly purchased car can develop engine problem or get involved in an accident, Goods can get lost through theft, A building (house) can be burnt through fire outbreak, etc.
When such incidents happen, the insurance replaces the person in his original position by absolving the loss occasioned by these risks. In the above examples, it is the duty of the insurance company to repair or replace the car .
An Insurance Company is an institution involved in the protection of persons and objects against risks.
Related Terms In Insurance:
Insured: is any person or group of persons who undertakes an insurance policy.
Insurer: The insurer is the company who has taken the responsibility to protect persons and objects against risks.
Sum insured: This is the value of policy taken i.e the amount at which the property is insured.
Indemnity: This involves placing the insured in his/her original position before the loss. That is absolving the loss.
Policy: This is the agreement between the insured and the insurer.
Third Party: Any person who is not the insured or the insurance company.
Premium: The agreed amount of money paid by the insured to the insurance company for insurance cover provided.
SERVICES PROVIDED BY INSURANCE
a. Protection of persons and objects under different types of insurance like motor vehicle, fire, life assurance etc.
b. Insurance serves as a pool of risks.
c. It grants both short term and long term loans to individuals, organizations etc from the money it collects from clients as premium.
d. Insurance offers advice to individuals, organizations, government etc. on the best way to secure lives and properties.
TYPES OF INSURANCE
1. Vehicle Insurance Policy:
Also known as Auto insurance, car insurance, or motor insurance, is insurance purchased for cars, trucks, motorcycles and other road vehicles.
2. Fire Insurance
This type of insurance is taken to protect the insured against loss arising from hazards to buildings and other properties.
3. Burglary Insurance
Burglary insurance sometimes called Breaking and Entering or housebreaking is an illegal entry into a building for the purpose of theft. Burglary insurance provides financial compensation against loss or damage to property by acts of burglary or housebreaking
4. Marine Insurance
This covers the loss or damage of ships, cargo terminals and any transport by which property is transferred, acquired, or held between the points of origin and final destination. It enables ship owners to insure their ship against loss or damage at sea, fire, storm, collision with other vessels etc.
5. Life Insurance
This is a policy that people buy to ensure against a Breadwinner’s death. If the insured person dies during the period, death benefits will be paid to the beneficiary.
BENEFITS OF INSURANCE
a. Redemption of Loss: Insurance redeems loss on the insured, thereby mitigating or reducing his pain of loss.
b. Insurance Stimulates Business: It enables the insured to engage fully in his business without much sense of fear arising from possible business collapse or failure.
c. Insurance Promotes Savings: The individual through payment of premium in life insurance, saves for the rainy day.
d. Source of Credit: A person that bought a life insurance policy increases his credit worthiness. Banks can easily give him enough credit line to do his business because his insurance can provide fund for repayment if the borrower dies.
e. Insurance is An Investment: Insurance provides compensation for victims of industrial accidents and road mishaps.
f. Promotion of International Trade: Through Insurance, International trade is encouraged by shifting the risk to an insurance company.
g. Growth of Business Competition: It enables small business organizations to compete with the bigger ones, and increases knowledge which is one of the benefits of competition.
h. Employment Opportunities: Insurance provides Employment opportunities to jobless persons which helps to create wealth and improve the living conditions of citizens.