In principles, insurance dwells on assumptions such as
1.The losses and consequences are uncertain
2.Rates of losses are fairly quantifiable and predictable
3.Losses are not calamitous
4.Losses are substantial
This unambiguously infers that speculative risks such as those involved in stock investments and gambling are not covered.
Very broadly, insurance can be said to be having two categories; one: Life Insurance and two: Non Life Insurance.
Life Insurance
Life insurance is generally meant to be covering the risk of ?life insured's? life for a predetermined sum, which is called the 'sum assured? to be paid either upon death occurring within the term of the insurance or upon expiry of the term itself. As a matter of fact, most of the life insurance policies are based and developed on this premise.
Non Life Insurance
The instrument non life insurance refers to insurance policy for anything other than life insurance. However, the principles are pretty much the same and sum assured and premium values are estimated in the similar way. Nevertheless, there exist two major differences between life insurance and non life insurance. They are:
1. The premiums payments are calculated on the basis of depreciating value of the insured property, each time. This invariably means that premiums get increased every time to cover up for the depreciation in the value of insured property.
2. The premiums paid over the period of the insurance are generally not guaranteed to be accumulated for payback at the end of the term unless otherwise explicitly expressed in the policy document.
A Few Non Life Insurances
Take a few examples for non life insurances here.
1.Unemployment insurance against job loss
2.Celebrity insurance against their intangible assets (teeth, legs etc.)
3.Health and dental insurance
4.Employees group insurance by their employers
5.Vehicle, house owners?, machineries insurance
6.Insurance for goods in shipment
Why Life Insurance
This is especially important to understand as many people tend to disregard insurance as something not of high importance. But in reality, insurance always covers your dependents when you are no more. It indemnifies your kin from your liabilities, such as, particularly, home loans. As a matter of fact, wiser step would be, higher the liability, greater is your insurance cover. Insurance are also instruments of tax deductible investments.
No matter the insurance companies are making huge profits, they are covering your life which is all the more important.
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