WHAT IS INSURANCE
Insurance is a means of protection from financial loss. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss.
An entity which provides insurance is known as an insurer, insurance
company, or insurance carrier. A person or entity who buys insurance is
known as an insured or policyholder. The insurance transaction involves
the insured assuming a guaranteed and known relatively small loss in the
form of payment to the insurer in exchange for the insurer's promise to
compensate the insured in the event of a covered loss. The loss may or
may not be financial, but it must be reducible to financial terms, and
must involve something in which the insured has an insurable interest established by ownership, possession, or preexisting relationship.
The insured receives a contract, called the insurance policy,
which details the conditions and circumstances under which the insured
will be financially compensated. The amount of money charged by the
insurer to the insured for the coverage set forth in the insurance
policy is called the premium. If the insured experiences a loss which is
potentially covered by the insurance policy, the insured submits a
claim to the insurer for processing by a claims adjuster.
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