This section consists of Basic Insurance concepts. Fundamentals Of Insurance. Nature of Insurance Contracts. Everything about Risk. General Claims Procedure.
Insurance companies are business houses.
The product they sell is financial protection. To succeed and survive, they must cover their costs, which include payments to cover the losses of policyholders, as well as sales and administrative expenses, taxes and dividends. The premiums are collected on a regular basis and invested in Government Bonds, Gilt, stocks, mutual funds, real estates and other conservative avenues. However, investment income depends on market conditions, interest rates, economy etc. and varies from year to year. Because of the uncertainty associated with the investment income, insurance companies must generate enough income from premiums to cover the bulk of their expenses.