Insurance:

• Insurance is a written contract or agreement between two parties. The party that provides insurance is called ‘insurer’ and the party that receives the insurance is called ‘insuree’.
• To take insurance, the insuree needs to pay a specific amount known as ‘premium’ to the insuree. The insurer then undertakes to provide a guarantee of compensation for financial loss that the insuree might face.

Explanation:

• We as individuals and our business or profession may face several risks.
• For example, we or our family members may fall sick, meet with an accident, die, etc. Similarly, our business or profession may face risks such as fire, earth-quake, strikes, theft, robbery, etc. Any such loss to an individual, his family, his business or profession will need money to recover the loss.
• Under such unforeseen circumstances insurance plays a very important role. If a person undertakes an insurance he can remain peaceful and out of financial worries that may occur in these situations.
• One can take insurance for an individual, family members, building, business assets like machinery, raw material, finished goods, etc.
• The insurance provider i.e. insurer is not an individual but a company or an organization.
• While taking insurance the insuree and insuree sign a contract known as ‘Insurance policy’. Note that the insurance cannot eliminate the risk a person or a business may face but it can only compensate the ‘financial loss’ caused by the risk.