Insurance is defined as a contract between an insurer and insured where the insured pays a premium in exchange for the insurer compensating for losses arising from events such as death, accidents, or property damage. It allows individuals to pool risks, with the insurer using collected premiums to cover losses while also investing premiums to generate capital for economic development. The key functions of insurance are providing certainty of compensation for losses, distributing risk across a large number of policyholders, and providing security for insured individuals and their property.

1. INSURANCE
Chapter – 4,
Office practice and Accountancy
Class-10

2. INSURANCE
Insurance is the process of indemnifying
against any of kind of loss
 According to Insurance Business Act, 2042:
“Insurance can be defined as a contract made by the
person paying a certain amount based on estimated life
and he or his representative (nominee) gets the
amount after his death or expiry of a policy period.”

#Indemnify = : to secure against hurt, loss, or
damage, to make compensation to for
incurred damage hurt, loss.

3. In other words, insurance is a contract between
insurer and insured where insured party pays
premium to the insurer for covering a loss that
arises due to loss of life or other damage .
Insurance is a way, which provides security to
the individuals and his property against the risk
and uncertainty. It is the cooperative method of
distributing the risk of an individual caused by
death, fire, accident etc. over a large number of
individuals in exchange for a regular
contribution called premium

4. FUNCTIONS OF INSURANCE

5. PROVIDING CERTAINTY (GUARANTEE)
Insurance provides certainty for the recovery of the
losses incurred by different causes such as death,
accident, theft, fire etc. Under this cooperative
scheme, the policy holder gets assurances of the
future uncertain risks & calamities in consideration
for a premium.

6.  Distributing risk
Insurance spreads the risk of a single person over a
large number of people involved in it. It accumulates a
large amount of premium into a fund from a large
number of insured persons or parties and manages to
compensate the financial loss. Thus, it can be regarded
as a mean of distributing risks & losses.

7.  Providing Security
Insurance provides protection against loss to the
insured. It provides feeling of security to the
insured against the possible risk of uncertain events
of their properties. Thus, insurance is a
cooperative device for making provision against
insecurity.

8. SECONDARY FUNCTIONS
 Formation of capital
 The huge amount of capital collected by an insurance
company as a premium is not required as once for
financial compensation. Thus, it accumulates such
capital and mobilizes it in different profitable sectors in
the form of investment. Thus, it provides capital for the
different sectors & assists for economic development.

9.  *Increasing efficiency*
 Insurance avoids the worries & tensions of the insured
person for losses due to unexpected events. It helps to
develop their skill & confidence. As a result, it increases
the efficiency of individual and organization for doing
creative & productive jobs.
 Help to minimize social problems*
The people of the society exposed to a number of personal
risks due to their accidental death, unemployment,
disability etc. Such events bring a serious economical
problem to the individual and his dependents. In such
circumstances, the insurance is considered as an
effective measure to minimize such social problems. For
this, insurance provides financial compensation against
the losses due to such events.

10. OTHER SECONDARY FUNCTIONS OF INSURANCE ARE
 Supports in economic progress
 Promoting trade
 Reducing Loss