Insurance refers to a contractual arrangement in which one party, i.e. insurance company or the insurer, agrees to compensate the loss or damage sustained to another party, i.e. the insured, by paying a definite amount, in exchange for an adequate consideration called as premium.
Types of Insurance
Basically, there are two types of insurance, as presented below:
1. Life Insurance: The insurance that covers the risk of the life of the insured is called Life insurance. In this, the nominee will get the policy amount, upon the death of the insurer. This is also called as an Assurance, as the event, i.e. death of the insured is certain. The payment of the policy amount on the maturity will be made in one shot (lump sum) or periodical instalments, i.e. annuity.
2. Non-Life Insurance: Any insurance apart from life insurance comes under Non-Life insurance. In this type of insurance, the policyholder gets the compensation only when the loss is caused to him, due to the reasons indicated in the policy. It is also called as non-life insurance. It is classified into three categories:
1. watch what is life insurance
2. Watch what is financial planning