What is Insurance and how it works ?
- A promise of Compensation for specific Potential future losses in exchange for a periodic payment.
- A Contract Between Two parties whereby one party agrees to undertake the risk of another in exchange for consideration known as premium and promises to pay a fixed sum of money to the other party on happening of an uncertain event(death) or expiry of certain period (in case of life insurance) or to indemnify the other party on happening of an uncertain event(in case of general insurance)
How Insurance works:
- Sharing of risks by pooling of funds
- When pool is managed by individuals , it is called Mutual Insurance
- When it is managed by a company, it is called general/life insurance