What is Insurance?
Risk transfer mechanism that ensures full or partial financial compensation for the loss or damage caused by event(s) beyond the control of the insured party. Under an insurance contract, a party (insurer) indemnifies the other party (insured) against a specified amount of loss, occurring from specified eventualities within a specified period, provided a fee called premium is paid.

Insurance provides protection only against tangible losses. Ensure that continuity of business, market share, customer confidence and dissatisfaction, resources to resume the operations after disasters, like wise etc.

Legality:
When a company insures an individual entity, there are basic legal requirements and regulations. Several commonly cited legal principles of insurance include:

• Indemnity – the insurance company indemnifies, or compensates, the insured in the case of certain losses only up to the insured’s interest.
• Benefit Insurance – The insurance company does not have the right of recovery from the party who caused the injury and is to compensate the Insured although Insured had already sued the negligent part.
• Insurable Interest – The insured typically must directly suffer from the loss. Insurable interest must exist whether property insurance or insurance on a person is involved.
• Utmost good faith – Insured and the insurer are bound by a good faith bond of honesty and fairness. Material facts must be disclosed.
• Contribution – insurers which have similar obligations to the insured contribute in the indemnification, according to some method.
• Subrogation – the insurance company acquires legal rights to pursue recoveries on behalf of the insured; for example, the insurer may sue those liable for the insured’s loss. The Insurers can waive their subrogation rights by using the special clauses.
• Causa Proxima – the cause of loss must be covered under the insuring agreement of the policy, and the dominant cause must not be excluded
• Mitigation – In case of any loss or casualty, the asset owner must attempt to keep loss to a minimum, as if the asset was not insured.
  

Methods of Insurance

• Co-Insurance – risks shared between insurers
• Dual Insurance – risks having two or more policies with same coverage (Both the individual policies would not pay separately- a concept named contribution and would contribute together to make up the policyholder’s losses. However, in case of contingency insurances like Life insurance, dual payment is allowed)
• Self-Insurance – situations where risk is not transferred to insurance companies and solely retained by the entities or individuals themselves
• Re-Insurance – situations when Insurer passes some part of or all risks to another Insurer called Re-insurer

Advantages & Dis advantages of Insurance:

The main advantages of insurance can be described as follows:

Provides economic protections – Covers the loss of properties due to theft, fire, accident and
other natural calamities.
Shares risks – Insurance Company reduces the risk of the insured in exchange for small premium.
Maintains standard of living – Safeguard in terms of money to avoid the unfortunate financial crisis.
Encourages saving – An insured person pays the amount of premium in time as stated in the agreement which encourages for developing a saving habit of persons.
Eliminates dependency – The life insurance policy gives full financial support to the dependent in case the death of the insured which helps to eliminate the dependency of people.
Grants loan – The provision of loan helps a person can also meet the need of fund. Bank and financial institutions prefer the insured assets as collateral for providing a loan.
Creates employment opportunities – As insurance has become business in the modern-day business world, hundreds of entrepreneurs and thousands of employees have been engaging in this line.
Promotes foreign trade – The growth of the international trade of the country has been greatly helped by shifting of risk to insurance company.
Helps to operate business smoothly – Insurance plays a vital role to let the business run smoothly even in the situation of unfavourable events.
Help to reduce inflation – An insurance company takes the money from the people in the form of premium, which reduces the volume of money in the market. Hence, it helps to control the inflation in the country.

The main disadvantages of insurance can be described as follows:

Does not compensate all types of losses which caused biasness to be insured by insurance company.
More time to provide financial compensation due to lengthy legal formalities.
Although insurance encourages savings, it does not provide the facilities that are provided by bank.
It intentionally tries to compensate as less as possible to the sufferer with the aim of maximizing profit rather than maximizing well-being of the insured.
It may lead to the crimes in the society as the beneficiaries of the policy may be tempted to commit crimes to receive the insured amount.
Sometimes, the total amount of premium might be higher than the policy amount receivable on maturity.

Types of Insurance

Auto Insurance – Auto insurance protects the policyholder against financial loss in the event of an incident involving a vehicle.
Coverage typically includes:

• Property coverage, for damage to or theft of the vehicle
• Liability coverage, for the legal responsibility to others for bodily injury or property damage
• Medical coverage, for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses

Gap Insurance

• Gap insurance covers the excess amount on your auto loan in an instance where your insurance company does not cover the entire loan.
• Depending on the company’s specific policies it might or might not cover the deductible as well.
• This coverage is marketed for those who put low down payments, have high interest rates on their loans, and those with 60-month or longer terms.
• Gap insurance is typically offered by a finance company
  Example: when the vehicle owner purchases their vehicle, but many auto insurance companies offer this coverage to consumers as well.

Health Insurance

• Health insurance policies cover the cost of medical treatments.
  Example: Dental insurance, like medical insurance, protects policyholders for dental costs.
• In most developed countries, all citizens receive some health coverage from their governments, paid for by taxation.
• In most countries, health insurance is often part of an employer’s benefits.

Income Protection Insurance

• Workers compensation insurance
• Disability insurance at workplace (short term)
• Disability insurance (long term)
• Disability overhead insurance
• Total permanent disability insurance

Casualty Insurance
Casualty insurance insures against accidents, not necessarily tied to any specific property. It is a broad spectrum of insurance that several other types of insurance could be classified, such as auto, workers compensation, and some liability insurances.

Crime Insurance
It is a form of casualty insurance that covers the policyholder against losses arising from the criminal acts of third parties.
For example, a company can obtain crime insurance to cover losses arising from theft or embezzlement.

Terrorism Insurance
Provides protection against any loss or damage caused by terrorist activities.
Example: In the United States in the wake of 9/11, the Terrorism Risk Insurance Act 2002 (TRIA) set up a federal program providing a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism. The program was extended until the end of 2014 by the Terrorism Risk Insurance Program Reauthorization Act 2007 (TRIPRA).

Kidnap and Ransom Insurance
Designed to protect individuals and corporations operating in high-risk areas around the world against the perils of kidnap, extortion, wrongful detention and hijacking.

Political Risk Insurance
Form of casualty insurance that can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions could result in a loss.

Life Insurance

• Life insurance provides a monetary benefit to a decedent’s family or other designated beneficiary and may specifically provide for income to an insured person’s family, burial, funeral and other final expenses.
• Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity.
• In most states, a person cannot purchase a policy on another person without their knowledge.
• Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies, are regulated as insurance, and require the same kinds of actuarial and investment management expertise that life insurance requires.
• In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance.
• Certain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities and endowment policies are financial instruments to accumulate or liquidate wealth when it is needed.

Burial Insurance
Burial insurance is a very old type of life insurance which is paid out upon death to cover final expenses, such as the cost of a funeral

Property Insurance
Property insurance provides protection against risks to property, such as fire, theft or weather damage. This may include specialized forms of insurance such as fire insurance, flood or earth quake insurance, inland marine insurance

Aviation Insurance
Protects aircraft hulls and spares, and associated liability risks, such as passenger and third-party liability. Airports may also appear under this subcategory, including air traffic control and refueling operations for international airports through to smaller domestic exposures.

Auto/motor/Vehicle insurance?
It is an agreement between insurance company and the customer that covers the protection of customers vehicle against financial loss in case of an accident or theft. In exchange for your paying a premium.