INSURANCE AND ITS EFFECT IN OUR SOCIETY

Insurance is a way of protecting financial loss, it prevents the risk of uncertain loss. It is a principle where the insurer(an entity which provides insurance) restores the insured/policyholder(one who buys insurances) to the approximate financial state before the loss occurred, no better, no worse. The money which the policyholders use to buy insurance is called " Premium". Read Other insurance terminology

The Insured gets a contract(insurance policy) which states the condition and circumstance under which the insurer will compensate the insured.

Insurance is basically a risk management, when the insured experiences loss he/she submits a claim to the insurer for processing by claim adjuster.

Effect of Insurance in Our Society

1. It helps the community by sharing or transferring risk, insurance companies also invest the premium into economy which helps flow of capital
2. Individual uses it to prevent falling into financial trouble when uncertain loss or damage occur resulting from a particular event, which gives peace of mind.
3. In as much as it helps it also increases fraud in the society which may be referred to loss due to intentional or carelessness this is why you need a very reliable insurance company.
4. It also causes moral hazard in which the party at risk will act differently from the way he/she ought to behave if fully exposed to risk

How insurance companies make their money

How to save money