- Definition: Insurance is a financial contract between a policyholder and an insurer that provides financial protection against loss or damage in exchange for premium payments.
- Basic Principles:
- Risk Pooling: A large number of people contribute premiums to cover the claims of a few.
- Risk Transfer: Insurance transfers the financial risk from the individual to the insurer.
- Premium: The amount paid by the insured to the insurer in exchange for coverage.
- Claim: The formal request made to an insurance company for payment after a covered loss.
- Deductible: The amount the policyholder must pay before the insurance kicks in.
- Policyholder: The individual or entity that owns the insurance policy.
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