Insurance

Insurance is a financial arrangement and risk management tool in which one party, known as the insurer or insurance company, agrees to provide financial protection or compensation to another party, known as the insured or policyholder, in the event of a specified loss, damage, illness, accident, or death. This protection is provided in exchange for a regular payment called a premium. When an individual or business purchases insurance, they receive a legal contract known as the insurance policy. This policy clearly states the coverage details, the terms and conditions, the premium amount, and the maximum compensation or sum assured that the insurer will provide in case of a claim. The concept of insurance works on the principle of risk pooling, where the insurer collects premiums from many policyholders and creates a pool of funds. Whenever a covered event occurs, such as a medical emergency, accident, or property damage, the insurer uses this pool to compensate the affected policyholder. In this way, insurance shifts the financial burden of unexpected losses from the insured to the insurer, thereby offering financial security and peace of mind.