CHAPTER 1: Insurance: What is it?
Insurance can be described as follows:
- A transfer system, in which one party – the insured – transfers the chance of financial loss to another party – the insurance company or the insurer.
An insured is a person, a business, or an organization whose property, life, or legal liability is covered by an insurance policy.
An insurer is an insurance company.
- A business, which includes various operations that must be conducted in a way that generates sufficient income to pay claims and provide a reasonable profit for its owners.
- A contract between the insured and the insurer that states what potential costs of loss the insured is transferring to the insurer and expresses the insurer’s promise to pay for those costs of loss in exchange for a stated payment by the insured.
FUNDAMENTALS OF INSURANCE
