Insurance Definition

Insurance is generally defined as a contract which is also called a policy.

An insurance policy is a contract in which an individual or an organization
gets financial protection and compensation for any damages by the
insurer of the insurance company. In simpler words, one can answer what
is an insurance policy as a form of protection from any unexpected loss or
damage. From this paragraph, one can get a clear overview of insurance
meaning.

Principles of Insurance
To ensure the proper functioning of the insurance contract, the insurer
and the insured have to follow the following principles.

 Utmost Good Faith

 Direct Cause
 Insurable Interest
 Indemnity
 Subrogation
 Contribution
 Minimizing the loss

Importance of Insurance
Insurance plays a major role in the insured’s life. Here are a few pointers
that will show how:

 The insured’s family is protected with the help of insurance at the

time something unexpected happens. Their family doesn't have to
worry about the monetary aspects of the finances in this case.

 We all know that unexpected events can occur at any time and are a
part of life. In case of any injury, illness, or death, finances are the
last thing that they need to worry about. This way, their emotional
stress is also reduced to an extent.

 Insurance is a great financial security to an individual's family. An

insurance policy gives the family the coverage needed as well as the
courage to move on.
  Insurance is peace of mind for the insured in case of theft or
medical emergency. This way they would not have to go and arrange
money or go into a panic mode.

 The funds which are provided by the insurance company are well
enough for managing the school fees of the insured children. It also
takes care of their standard of living.

Functions of Insurance
The functions of insurance can be listed as follows:

 They provide certainty to the insured.

 They ensure the protection of the family.
 They are risk-sharing policies.
 They prevent the damages that can come from loss.
 It provides capital.
 It’s known for improving efficiency.
 It helps in boosting the economy.

Types of Insurance
After having gone through the following points, one can get an answer to
the question of how many types of insurance are there?

Health Insurance
Health insurance is a contract that is formed between a health insurer and
a policyholder. This policyholder is also known as the insured person. In
this contract, the health insurer agrees to pay the full medical cost of the
insured or just a portion of it.

Car Insurance
Vehicle insurance covers cars, motorcycles, trucks and all the other
vehicles running on the road. This insurance is meant for giving protection
against any physical damage or bodily injury that the vehicle suffers from
recklessness or an accident. All the cost incurred to repair the vehicle is
met by the insurance company.

Life Insurance
Life insurance is a contract in which the beneficiary is paid a fixed amount
of money by the insurer after the death of the insured. The beneficiary
uses this money to clear out the debts of the insured and also to meet
his/her financial expenses after the death of the insured. The beneficiary
is usually the spouse of the deceased. The beneficiary name is mentioned
in the contract.

Homeowners Insurance
Homeowners' insurance protects one's house from the uncertainty of any
damages. The insurance covers the house the insured person resides in
and other associated structures connected to the house such as the
balcony, garage and porch. The insurer will provide the amount incurred
to repair any damage in the house or its associated structures.

Umbrella Insurance
Umbrella insurance is also known as liability insurance. It covers the cost
that is incurred in excess of other insurance policies. It gives a person
extra coverage on another type of insurance policy that he/she is in.

Renters Insurance
Renters insurance is meant for tenants who use it to protect their
personal property from any damage or theft. The insurance covers all the
assets owned by the tenants. This is done because the landlord doesn’t
take any responsibility for the assets of the tenant. Nowadays, landlords
are not allowing tenants who don't have insurance.

Travel Insurance
Travel insurance is good for those people who travel a lot. It covers trip
cancellations, lost or misplaced luggage, travel accidents and even medical
expenses.

Pet Insurance
Pet insurance is meant for meeting all the expenses that are incurred
concerning the sickness and accidents of the pet. All the medical expenses
of the pet are taken care of by the insurer.