Q.Define Insurance

Insurance is a contract between the insurer and the insured in which, in return for a premium, the insurer agrees to compensate the insured for a specified loss or to pay a fixed amount on the happening of a specified event. It is essentially a method of spreading risk among many people. ## Definition of Insurance Insurance is a legal contract (the policy) under which one party, called the insurer (the insurance company), agrees to make good the loss suffered by the other party, called the insured, on the happening of a specified uncertain event, in return for a consideration called the premium. It is based on the principle of cooperation: a large number of persons exposed to a similar risk contribute premiums into a common fund, and the few who actually suffer a loss are compensated out of that fund. Thus the loss of the unfortunate few is shared by the fortunate many. Insurance does not prevent a loss from happening, but it reduces its financial burden. It is studied in the AP Intermediate 2nd-year Commerce chapter on Insurance, Warehousing and Transport. …