If the insured experiences a loss which is potentially covered by the insurance policy, the insured submits a claim to the insurer for processing by a claims adjuster. The amount of money charged by the insurer to the policyholder for the coverage set forth in the insurance policy is called the premium. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insurer will compensate the insured, or their designated beneficiary or assignee.
Furthermore, it usually involves something in which the insured has an insurable interest established by ownership, possession, or pre-existing relationship. The loss may or may not be financial, but it must be reducible to financial terms. The insurance transaction involves the policyholder assuming a guaranteed, known, and relatively small loss in the form of a payment to the insurer (a premium) in exchange for the insurer's promise to compensate the insured in the event of a covered loss. Policyholder and insured are often used as but are not necessarily synonyms, as coverage can sometimes extend to additional insureds who did not buy the insurance. A person or entity who buys insurance is known as a policyholder, while a person or entity covered under the policy is called an insured.
It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss.Īn entity which provides insurance is known as an insurer, insurance company, insurance carrier, or underwriter. Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to guarantee another party compensation in the event of a certain loss, damage, or injury. 1900–1918 that depicts an armored knight Financial market participants An advertising poster for a Dutch insurance company from c.
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