Page 12 - Life Assurance

/1 What do we mean by insurance?

1) Insurance is a device to handle risk. Its
primary function is to substitute certainty for
uncertainty (as regards the economic cost-of
disastrous events).

Insurance may be defined more formally as
a system under which the insurer, for a
consideration, promises to reimburse the
insured or to render (perform) services to the
insured in the event that certain accidental
occurrences result in losses during a given time
period (insurance period).

2) Insurance is a device (system) for the
transfer of risks of individual entities to an
insurer, who agrees, for a consideration (called
the premium), to assume to a specified extent
loss suffered by the insured.

3) Insurance is a contract, by which one
party (called the insurer) - in return for a
consideration (called the premium) - undertakes
(promise) to pay to other party (called the insured),
sum of money or its equivalent in kind, upon the
happening of a specified event, that is contrary
to the interest of the insured.

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