What is Life Insurance?

Life insurance is a contract where insurer in exchange of a sum we call premium, agrees to pay a agreed sum to beneficiary, on the death of the insured or to insured himself on expiration of a predetermined period we call term.

Life insurance is very important for any person. There are some risks that each individual face. To mitigate these risk one must know them properly. They are :-

Three Significant Risks:-

1) Danger of dying too soon.

2) Danger of dying too old.

3) Danger of Disability and Sickness.

How Life Insurance Mitigates Them:-

If one dies too soon insurance company will pay the amount of insurance to his family. It mitigates the hardship of the family and helps them to survive. If one dies too old, he will get maturity value of insurance if the policy has this feature other than term insurance. So he will be supported on old age. So insurance covers both long life and short life risks.

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Why You Need Insurance?

What is risk?

Anything that cannot be predicted is risky. Risk means uncertainty. Insurance is a contract that helps you to shift the burden of injury caused by this uncertainty. Like while driving a car you have Third Party Insurance to cover any injury that you may cause to any vehicle or person on the road. As there is a level of uncertainty involved in driving a car and accidents may took place. There is a insurance policy to mitigate the risk.

What is a Contract of Insurance?

 Insurance is a contract by which the Insurer agree's to pay a predetermined amount or any amount that is determined by method that is predetermined to the insured against the happening of an event against which the policy of insurance is taken, in exchange of a consideration we call Premium.

Insurer:- Person who is assuming the risk.and who is getting the premium.

Insured:- The person against whose lose insurer will pay money and who pays the premium

Insurance Amount:- The amount paid by insurer on happening of event.

Premium Amount:- The consideration of contract of insurance.

How Insurance Protect's You?

Insurance helps you to attain status quo. This means you are returned to the same position in which you where had the event does not take place. The money the insurance company pay to you can be diverted to reinstatement of the injury that is caused.

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