The purpose of Insurance
The purpose of Insurance include the following;
Loss reduction:
Insurance policy holders eliminate or prevent the risk of crippling loss by substituting a small definite cost for the variability of losses under a mechanism called the unfortunate few suffererion the deduction who where misfortuned are compasated by the fortunate,many who escape loss. Some of these loss activities include fire prevention,reduction of automobile theft , prevention and detection of arson loss, prevention of defective products that could injure the user etc.
Creation of less worries and fears:
The need to keeep cash and precious wealth such as gold and diamond tied up to meet unforseen contingencies and suituation are eliminated there by providing for less worries and fear of the unknown.
Source of investment of funds:
The accumulated fund and cash from the operation of insurance activities can be invested in other viable sectors of the economy and market to generate revenue. There fore out of the premium collected by the insurance companies in advance of loss, funds that are not needed immediately to pay losses and expenses can be loaned out to business firm and return the insurance company get interest on such loans that was given out to business owners.
Indeminity for loss:
Indeminification allows family , individuals and business organizations to be restored to the and gain position of their former financial status thereby allowing business firms to remain in business activities and employees to keep their job going.
The insurance contract
Insurance bieng a contract, where by the isurer agrees in consideration of a specific premium to be paid by the insured and to indeminfy the insured against loss and damage resulting to him or her in happening of the event ,must conform to the general rules of law governing all business contract.
The parties to all insurance contract
1. The insured (which an insurance company).
2. The insured or assured in the case of life contract or life assurance
The insured is the person who benefits from the insurance policy. That is,who take the proceed of the policy in an event of a claim. In life assurance however ,about three parties are always invove in the process of insurance contract. An example is when a wife takes a life , policy on life of her husband , in such case ,the parties will include the following;
1. The insured
2. The person whise life is insured
3. The assured, there fore the beneficiary.
The agreement is thereby set out in a policy of insurance. This policy thereby thus remains the evidence of the insurance contract. The policy should thus contain and defined the following;
1. The risk being transferred or incurred
2. The condition and the terms of contract
3. The process and procedures to be followed in the event of occurrences of a loss.
Normally the policy forms vary depending on the particular branch of insurance. While recognizing and acknowledging the fundamental principles applicable to all branches of insurance and it policies.
Functions of insurance;
Insurance have primary and secondary functions. The primary functions of every insurance cimcomp is to ensure that the financial losses of individuals,firms and business organizations are fairly and adequately distributed over the ensured organizations or individual. However the secondary functions of the insurance companies are as follows;
1. Offering and given of financial security to business organizationsand individuals. Insurance policies promote and encourage firms through gauranteed assurance that an industralist will be indeminfy in the event or suituation if damage or loss. Hence , the success of most business organization
2. Insurance undertaking provide loans opportunities on the security of insurance policies especially life policy where most insurance companies invests their accumulated finance or money in government approved securities which helps provide steady flow of finance in the economy system. Insurance there fore improves revenue generation and employment opportunities for the teaming graduates in the society.
3. Insurance industry has catalizes and expose the decipline by institutionalizing the profession in the various institute of learning across the globe.
The subject matter of insurance;
The subject matter of insurance could be either some coroparate property of value or material property of value, that is property, life or kiabliabi. For instance, personal computer or furniture. It could be an event the happening of which will create liability. In life insurance however, the life however , the life assured authomatically becomes the subject matter of insurance. It is therefore clear that the classes of insurance the matter of insurance should be clearly stated in the policy shcedule. Therefore the decision of the subject matter will encompass the make and type or in authomobile and machines, the chassis an registration number. This assist in the event of claim in providing a better identity. Similarly in fire policy covering a house the building which is the subject matter of insurance will be given adequate description in the insurance policy schedule.
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