Insurance may be defined as protection against a specific loss over a period of time that is secured by the payment of a regularly scheduled premium. It is the amount paid to an insurance company for the purchase of an insurance policy for their promise of reimbursement in the case of loss. The policy is a written contract or certificate of insurance. To sum up – insurance is a contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium.
The origin of insurance can be traced back to almost 2000 B.C. when the Babylonian traders paid their money lenders an extra sum over and above the loan amount on the understanding that if their business failed (read shipment was destroyed or stolen) then the money lender would waive the loan. Then around 1000 B.C. merchants from Rhodes who shipped their goods together pooled their resources and kept it aside do recompense a partner in case his shipment was destroyed due to any reason.
Life insurance came into being about 500 A.D. when Greeks and Romans controlled unions called benevolent societies who looked after the family of a person who had passed away, chipping in with funeral expenses and death duties. These ‘friendly societies’ only made their appearance in England by the late 17th century. Fire insurance was first offered by one Nicholas Barbon, in 1666, after the Great fire of London had gutted more than 13,200 homes.
Kinds of insurance
From individual body parts to individuals, now everything can be insured, it just needs ingenuity, to think up new areas to insure. Some important insurance areas are:
- life insurance
- automobile insurance (also known as car or motor insurance)
- fire insurance
- total permanent disability insurance
- health insurance (covers medical bills in case of accidents and sickness)
- travel and transit insurance
- marine insurance and
- workers compensation insurance