Insurance is a transfer of risks of losses to another party, the insurance company, in exchange for a premium payment. There are different types of insurance including personal insurance – life, health, accident, general insurance – vehicle and property etc. They can help us to prepare for catastrophes and ease the financial pressure during crisis.
The fundamental principle of insurance is to pool a large amount of funds from many individuals in the society and to pay for the losses of some that suffer from the underlying risk. For example, by paying a relatively small amount of premium to the pool, one can receive a huge indemnity when he suffers from critical illness, and therefore limit the losses to his financial status.
In modern society, insurance has evolved into a more complex financial instrument. It is frequently used to fulfill family protection, investment, tax and estate planning at the same time.