what is insurance? February 2023

Insurance is a contract between an individual (Policyholder) and an insurance company (Provider). Under the contract, you pay regular amounts of money (as premiums) to the insurer, and they pay you if the sum assured on unfortunate events arises, for example, untimely demise of the life insured, an accident, or damage to a house.

How Does Insurance Work? 

​Insurers use a pool of many premiums to pay for the home, auto, and business losses of unfortunate enough to experience a loss. You are covered for losses outlined in your contract only, not for predictable events.

The insurance sector is made up of companies that offer risk management in the form of insurance contracts. The basic concept of insurance is that one party, the insurer, will guarantee payment for an uncertain future event. Meanwhile, another party, the insured or the policyholder, pays a smaller premium to the insurer in exchange for that protection on that uncertain future occurrence.

So in case your property or life is accidentally lost, stolen, damaged, or destroyed, and you have a general insurance policy that covers the property for those risks, you can make a claim and draw on that pool of money to help pay for repairs or replacements costs.