Insurance | Meaning of Insurance in simple words? Concept of Insurance and Types of Insurance - financebrother

Insurance meaning in simple words

Insurance is the financial contract in which one party agrees to cover the financial risk and promises to pay the agreed amount in the contract in exchange of charging a nominal premium from the other party.

Insurance basically worked on the concept of risk pooling, which is 'Risk of few shared by many'.

Basically, there are two parties involved in the insurance contract. One is insurer, the insurance company and the insured, the customer of the insurance companies who buy the insurance policy.

Types of Insurance

There are two types of insurance:

1. Life insurance: It provides protection to your life against any unforeseen risks like dying too early, living too long, etc.
2. Non-Life/General Insurance: All insurance other than life insurance comes under general insurance and provides protection to your property and liabilities against unfortunate risks like fire, accidents, etc.