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Insurance is a cover used for protecting a person from the financial losses. Financial losses can take many forms. There are risks to our investments, liabilities for our actions, and risks to our ability to earn income.

The insurer and the insured are the two main parties involved in insurance. The insurer is the insurance, the coverage to the insured against financial loss. The insured can be a single person or a group of people as an employer, the members of a society, etc.

Basic categorization of insurance

There are basically two broad categories of insurance --

* Life insurance
* Non-life insurance

Life term life insurance policy are the only clean risk coverage of the death benefit while the equipment or money-back policy, the danger, as well as savings component ie death and maturity benefit. Life insurance also Unit - Linked Policies in which there is a risk and a savings component, which invests in shares, bonds or gilt funds, depending on the insurance company.

Non-life insurance products are the property or casualty insurance, health insurance or a house, fire, marine insurance etc. This insurance category deals with non-life aspects of the insured, as their home, health, land, office, etc, are concerned about financial losses.

There are few principles of insurance, such as:

* Final loss - Insurance - The event, for the loss, subject to insurance should, at least in principle, take place at a time known to a known location, and from a known cause. The classic example is death of an insured on a life insurance policy.
* Unintended or accidental loss - Insurance - The event, which triggers a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance, the loss should be "pure," in the sense that it is an incident for which there is only the possibility for the costs.
* Big Loss - Insurance - The size of the damage must make sense from the standpoint of the insured. Insurance premiums must be the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to assure the rational, that the insurer will be able to file claims.
* Low cost premium - Insurance - If the probability that an insured event is so high, or the cost of the event is so large that the resulting premium is large relative to the level of protection offered, it is not likely that someone buy insurance, even if on offer.
* A large number of identical coverage units - Insurance - The vast majority of insurance for the individual members of very large classes. The existence of a large number of identical coverage units allows insurers to benefit from the so-called "law of large numbers", which, in fact, believes that the number of units increased coverage, the actual results are increasingly likely to be close to expected results.
* Measurable loss - Insurance - There are two elements that must be at least estimatable, even if not formally calculable: the probability of losses and the associated costs. Probability of loss is generally an empirical exercise, while the cost is more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss in connection with a claim under this policy, a sufficiently concrete and objective assessment of the recoverable amount of the loss as a result of the exposure.
* Limited risk of terribly large losses - insurance - If the same event can cause losses to numerous policyholders of the same insurer, the ability of the insurer that the policy issue is restricted, not by factors around the individual characteristics of a policyholder but by the factors that makes the sum of all policyholders so exposed.

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