Definition, meaning, nature and importance of insurance contract
Answers
Definition:
An insurance is a contract between the issuer and the insured which decides the claim which the insurer is legally required to pay.
Meaning and Importance:
Presently insurance refers to financial protection against losses arising in case of an uncertain event. Insurance contract is basically ensuring the security of a person against any catastrophe in life.
Every one wants to be secure, or be content on certain conditions be it against fire, road accidents, falling ill or otherwise. So the insurance contracts helps in overcoming the heavy unexpected losses.
Nature:
1. By nature insurance is a devise of sharing risk by large number of people among the few who are exposed to risk by one or the other reason.
2. If a large number of subscribers to insurance serve the purpose of compensation to few among them exposed to uncertain risks appears as a co-operative look.
3. Valuation of risk is determined as per predefined terms and conditions of the insurance policies.
4. Insurance basically provides facility of financial help in case of contingency.
5. Insurance is a policy regulated under laws so it is evident that the amount of insurance can neither be paid as gambling nor as charity.