Insurance Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a potential loss, from one entity to another, in exchange for a premium. Insurer, in economics, is the company that sells the insurance. Insurance rate is a factor used to determine the amount, called the premium, to be charged for a certain amount of insurance coverage. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.
Principles of insurance
1. A large number of homogeneous exposure units.
2. Definite Loss.
3. Accidental Loss.
4. Large Loss.
5. Affordable Premium.
6. Calculable Loss.
7. Limited risk of catastrophically large losses.
Tuesday, August 14, 2007
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