It is a legal agreement between two parties. i.e. insurance company and the Individual (insured). Insurance company promise to make good the losses of insured on happening of the insured contingency. The contingency is the event which causes a loss. It can be death of policyholder or damage/ destruction of the property. It’s called a contingency because there’s an uncertainty regarding happening of the event. Insured pays a premium in return for the promise made by the insurer.
Life Insurance
In this life insurance company pays a specific sum to the insured individual’s family upon his death. Life insurance sum is paid in exchange for a specific amount of premium.
General Insurance
Insurance contracts that do not come under ambit of life insurance are called General Insurance. It provides covers for risks other than life – risk.
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