INSURANCE

Insurance is the business of protecting the economic value of an asset. An asset is defined as something which generates income to its owner.An asset can be lost or destroyed due to various reasons: like floods, fire, riots, death, etc. They are called hazards or perils. More often than not, the loss of an asset will result in the complete ruination of the owner.Even though Insurance cannot physically protect an asset, it can compensate the economic loss arising out of an unexpected occurance of an event. Perils are therefore unexpected occurences of events and risk is the possibility of damages arising out of peril.

The damage may or may not occur, which means, when we use the word risk, there is an element of uncertainty. Insurance guards against such uncertainties, properties and people are exposed to. It therefore goes without saying that if there is no risk, there is no need for insurance. In other words, it is an element of uncertainty which creates the need for insurance. Risks cannot be prevented or avoided; so they are transferred to an insurance company. By availing insurance, the individual transfers his responsibility of continuous generation of income even in the event of his death to an insurance company.Only economic consequence can be insured. Examples of non-economic losses are love and affection, sentimental attachment and creative abilities.