Insurance

Insurance is a contract, based on the principle of pooling of risks, by which one party undertakes to indemnify against loss, damage or liability arising from an unknown or contingent event. By insuring a life or property, those who insure contribute to common fund out of which the compensation is paid to those insured who suffer loss. The insured pays a premium out of which they’d be compensated incase of loss. This enables the insurance company to pay compensation and still make profit.

Basic principles of insurance;

ü Pooling of risks

ü Insurable interest

ü Uberrimae fides

ü Indemnity

ü Subrogation

ü Contribution

ü Proximate cause

Importance of insurance to individuals & businesses may include:

ü It’s a safeguard against numerous risks to which capital is exposed

ü It reduces the burden of losses to the entrepreneurs

ü It gives the confidence and safety needed to venture into uncertain areas

ü It promotes bilateral and multilateral trades

ü A life insurance policy may be used as collateral to raise bank loans needed for investments or business expansion.

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