Life Insurance

Category: Finance, Insurance.

Insurance is a cover used for protecting a person from the financial losses. There are risks to our investments, liabilities for our actions, and risks to our ability to earn income.

Financial losses can take many forms. The insurer and the insured are the main two parties involved in insurance. The insured may be an individual person or a group of people like an employer, members of a society, etc. The insurer is the insurance company which will provide the cover to the insured against any financial losses. Basic categorization of Insurance. Life insurance.

There are mainly two broad categories of insurance. Non- life insurance. The life insurance also includes Unit- Linked Policies in which there is a risk component and a savings component, which is invested in equity, debt or gilt funds, depending on the insurance company. Life insurance products include Life term policies, which give clean risk coverage of only the death benefit, whereas endowment or money back policies have a risk as well as savings component i. e. death as well as maturity benefit. Non Life insurance products include property or casualty, health insurance or house, marine insurance etc, fire. There are few principles of insurance, such as: Definite Loss- Insurance- The event that gives rise to the loss that is subject to insurance should, at least in principle, take place at a known time, in a known place, and from a known cause.

This insurance category deals with all the non- life aspects of an insured like their house, land, health, office, etc which might bring financial loss. The classic example is death of an insured on a life insurance policy. The loss should be pure, in the sense that it results from an event for which there is only the opportunity for cost. Unintentional or Accidental Loss- Insurance- The event that comprises the trigger of a claim should be accidental, or at least outside the control of the beneficiary of the insurance. Huge Loss- Insurance- The size of the loss must be meaningful from the perspective of the insured. Affordable Premium- Insurance- If the probability of an insured event is so high, or the cost of the event is so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that anyone will buy insurance, even if on offer. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, and supplying the, adjusting losses capital needed to rationally assure that the insurer will be able to pay claims. .

A large number of identical coverage units- Insurance- The vast majority of insurance policies are provided for individual members of very large classes. Measurable Loss- Insurance- There are two elements that must be at least estimatable, if not formally calculable: the probability of loss, and the attendant cost. The existence of a large number of identical coverage units allows insurers to benefit from the so- called" law of large numbers, " which in effect states that as the number of coverage units increases, the actual results are increasingly likely to become close to expected results. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim. Limited risk of terribly large losses- Insurance- If the same event can cause losses to numerous policyholders of the same insurer, the ability of that insurer to issue policies becomes constrained, not by factors surrounding the individual characteristics of a given policyholder, but by the factors surrounding the sum of all policyholders so exposed.