Insurance is defined as form of risk management basically used to hedge against the risk of a contingent loss. It is also the equitable transfer of a risk or loss, from one entity to another in return for a premium. The insurer is the company that sells the insurance for a premium. The premium is determined by the insurance rate, for a certain amount of risk coverage.



The size of the loss should be sufficiently large and generally above the costs incurred in handling the claim and administering the policy. The premium should be affordable and relative to the amount of protection offered. The loss should be calculable in terms of probability of loss and the attendant cost. For the insurer there should limited risk of catastrophically large losses. In the event where there are losses to numerous policy holders at the same time, then the ability of the insurer to issue policies is restricted.

On purchasing a policy you have to draw up a contract with the insurer. There are two types of insurance contracts; an "indemnity" policy and a "pay on behalf" or "on behalf of" policy. The difference is merely on paper, but not in practice.

There are various types of insurance policies. The life insurance policy provides monetary benefit to the deceased family on the even of the insured person's death. They provide a source of income, as well as for the burial, funeral and other final expenses..

Health insurance policies cover the cost of private medical treatment if any publicly funded program does not pay for them. It allows the insured to take the best and quickest treatment wherever available. Dental insurance covers the individual's dental expenses.

Disability insurance provides financial support to the policy holder during the period when they are unable to work because of disabling illness or injury. Total and permanent disability insurance provides monetary benefits when the person is permanently disabled and can no longer work in their profession.

Property insurance provides protection against risks to property from theft, fire, weather, earthquake and flood insurance. Casualty insurance covers protection against accidents, not necessarily tied to any property. Automobile insurance also known as motor insurance and can cover both legal liability claims against the driver and loss of or damage to the insured's vehicle.

There are many more types on insurance covering all possible risks that man can face from natural or man made causes such as aviation insurance , boiler insurance , builders risk insurance , crime insurance , crop insurance , earth quake insurance , flood insurance ,marine insurance , political risk insurance , surety bond, terrorism insurance , volcano insurance , and windstorm insurance .

I policies are dealt by two types of companies, they are

Life insurance companies which sell life insurance, annuities and pensions products and

Non life or general insurance companies which sell other types of insurance.

General insurance companies can be further divided into these sub categories.

Standard Lines and Excess Lines.