Principals of Insurance Company

With the number of risks increasing in the world, insurance companies have come up with methods to compensate individuals who are affected. It is a form of risk management whose main function is to cover up for uncertain loss. The insurer is the person who sells the insurance policy to the insured. The insured assume guarantee from the policy maker in case of any damage, which might occur, in exchange for the insurer’s promise to compensate indemnity. The insurance policy contains circumstances and conditions under which the person being covered will be financially compensated. There is pooling of funds from many entities to compensate an accident, which may be incurred.

  • Insurable risk

The loss covered must meet certain characteristics. The information provided about the property must also be true. The company must charge premiums to cover the claims expenses and the owner’s expenses as well. The risk being covered must be of a reasonable amount and should not be catastrophic that the company will not be able to pay in case of loss. The nature of the danger should be measurable financially as well as definite. This ensures that there is no chance of argument when there is loss in terms of amount to be paid, or whether payment should be made or not. The risk must be random in nature. The general rule in all companies of insurance is that unless otherwise agreed, risk passes with title.

  • Indemnity

This is the amount payable to the client by the insurance company in case of any loss, which might be incurred. Forms of indemnity includes cash payments, repairs, reinstatement, and replacement. Car insurance is a good example of indemnification in that if the owner of the car is involved in an accident and it was covered, it is the work of the insurer to indemnify the insured driver by making his vehicle whole again. The amount of the risk is calculated before and after the accident so that the individual is compensated and returned to the financial position he was before. It does not increase or reduce the financial status of the party being involved.

  • Material facts disclosure

The insured is required to provide accurate information about the property. The duty of disclosing material facts is not enough as the principal requires all the information related to the property. In case of life insurance, the proposer must provide true age and details of the current disease, which they might be suffering from. The owner should not be directly linked to the risk in order to be compensated.

The presence of insurance companies in the market has really leaded to increase of business. This is because now, more people can now open their company without fear of any loss, which might occur. The rate of economy growth in a country has really gone up, since in case of a deficit, the industry is returned to its original financial state before the risk had occurred with the insurance company concerned.