Insurance Definition And Principles
The insured by paying a definite amount in exchange for an adequate consideration called as premium.
Insurance definition and principles. Insurance is defined as the equitable transfer of risk of loss from one entity to another in exchange for a premium. Insurance is a device not to avert these risks but to mitigate they re rigorous on individuals. Used by insurance companies to quantify risk factors and determine the cost of indemnity. Then read the lot.
Insurance is defined as a cooperative tool which is meant to spread the damage caused by a particular risk which comes in contact with it and who agrees to insure themselves against that risk. Principle of uberrimae fidei a latin phrase or in simple english words the principle of utmost good faith is a very basic and first primary principle of insurance. Upon the same principle edward rowe mores established the society for equitable assurances on lives and survivorship in 1762. Read on to learn about the principles of insurance contracts.
The main motive of insurance is cooperation. Insurance is essentially a contract by which one party gives a consideration typically paid in money in exchange for a promise from another party to make a return payment if a certain loss has occurred. If one person is providing for his own losses it cannot be strictly insurance because in insurance the loss is. Do you study to learn.
As in all insurance the insured person pays the premium in risk transfer and exchange to the insurer. Create new flashcard. According to this principle the insurance contract must be signed by both parties i e insurer and insured in an absolute good faith or belief or trust. Insurance is based upon two basic principles.
Insurance is defined as a co operative device to spread the loss caused by a particular risk over a number of persons who are exposed to it and who agree to insure themselves against that risk. Contractual definition insurance may be defined as a contract consisting of one party the insurer who agrees to pay to other party the insured or his beneficiary a certain sum upon a given contingency against which insurance is sought. The first company to offer life insurance was the amicable society for a perpetual assurance office founded in london in 1706 by william talbot and sir thomas allen. The risk is the uncertainty of a financial loss.
The important principle of insurance are as follows. Insurance is a co operative device. Insurance company or the insurer agrees to compensate the loss or damage sustained to another party i e. A principle of risk management based on assumptions of expected outcomes in which the law of averages is applied in theory or in practice to approximate those outcomes.
In order for the relationship between the insurer and the insured to work however there are certain important principles that must be upheld.
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