What is insurance, and why is it needed?

What is insurance, and why is it needed?
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What is insurance, and why is it needed?

Insurance is a contract. It is a legal agreement between the two parties. One party enters the deal with the assurance that the other party will pay compensation. The other party is bound by the contract with the guarantee of the premium payment at a fixed rate for compensation. An agreement between the first party insurer and the second party insured deposits balance and premium payment, respectively. In the case of life insurance, the loss is not compensated. No value can be measured in human life. So in the case of life insurance, financial security is provided.

The insurance industry plays a vital role in the economic development of any country. Insurance helps raise capital by collecting small savings (premiums) from the public. Guarantees compensation for human life, debts, and property. With such assurances, people can feel safe in their workplace and concentrate on their work. As a result, individual production increases. Thus, when individual production increases, national production increases. Increasing production improves the people’s living standards and brings economic prosperity to the country as a whole. Example: life insurance contract, fire insurance contract.

What are the benefits of insurance?

Insurance benefits:

(1) It provides security of life and property.

(2) It creates capital.

(3) It is a source of old age and emergency.

(4) It gives peace of mind.

(5) It finances the business.

(6) It reduces inflation.

(6) It provides for the security of social property.

What are the steps to ensure?

The steps to ensure are:

  • The sales representative of the insurance company or from the website to be informed about the different plans of the customer and review the other methods: to choose the program of choice.
  • To apply in the prescribed form of the insurance company for taking the plan of choice of the insurance customer.
  • Reviewing the insured’s policy and the accompanying documents submitted: To make a written decision of the insuring company.
  • Payment of premium by the insurance customer after receiving the insurance company’s decision.
  • The final execution of the insurance contract by the insurance company through FPR after payment of premium by the insurance customer.
  • Collection of insurance documents by the customer after the execution of FPR by the insurance company.

What is premium?

The insurance premium is the return of the promise of compensation or claim payment to the insured under the insurance contract. In the case of life insurance, the insured pays the insurance claim in case of death of the insured on or before the expiry of the term due to the premium being paid by the insured to the insurer/insurance company. The definition of premium in the analysis of different perspectives of experts is as follows:

“An insurance contract is a policy of insuring the insured against any possible uncertainty or risky financial loss on his or her life or property in the future or in return for a promise to pay the insurance claim at a fixed rate or for a certain period of time or The one-time payment is called insurance premium.”

In the case of life insurance, the premium is usually collected in annual installments. However, for the insured’s convenience, half-monthly, quarterly, and even monthly tips are available.    

What is the total insurance amount?

The subject of life insurance is human life. It is not possible to determine the value of life. Therefore, in the case of life insurance, the sum assured is the sum assured of the financial benefit that the insured provides to the insured in exchange for a certain amount of premium. 

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