Insurance

Insurance

Insurance is a risk management measure that is used to hedge against the risk of contingent uncertain losses e.g. death, accidents, illness, theft, fire, natural disasters, etc. Insurance generally involves the transfer of risk from one entity, the policy owner (or the insured), to another entity, the insurer, in exchange for a fee called a premium. The premium may be a periodic payment or a lump sum amount and is calculated so as to cover the cost of funding the benefits or claims that may be paid in the future, administrative costs & expenses and profit margins, if any. In return, the entity assuming the risk provides the policy owner (or the insured) with an insurance contract called the insurance policy and promises to indemnify or reimburse the policy owner (or his beneficiaries) if and when the contingent event materializes and financial losses are incurred.

 

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