Insurance is where you pay money to a company, and in turn the company promises to pay you if certain bad things happen.
It is a way to protect yourself from losing large amounts of money.
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• for home insurance they might pay for your house to be repaired if it gets damaged.
• for credit insurance they might repay all or part of a loan if you lose your job.
Insurance has a “policy document” that has special conditions, such as when they will or will not pay.
Example: for car insurance they won’t pay anything when you damage your car on purpose.
Features of Insurance
Since insurance is a contract, therefore, it should be written and it should contain characteristics. Following the important features and characteristics of insurance.
Two Parties – The Insurer and the Insured. An insurance contact, like others, must have to parties – the insurer who agrees to compensate whenever specified event or events take place and the insured who agrees to pay the consideration as agreed upon and abide by all the terms and conditions of the insurance contact.
Utmost Good Faith. In insurance contact the insured is legally liable to disclose all the materials facts (which may affect the very nature of the contact) to the insurer. It is on this basis the insurer agrees to compensate, thereby cover the risk. Nothing should be concealed. If however, something is concealed, the insurer may back out on the place that the principle of utmost good faith was not adhered to by the insured.
Premium. The insured agrees to pay either a single premium or a periodical premium for which the insurer covers and in case the specified events happens he agrees to pay the compensation specified therein.