Insurance as a financial security

Insurance is a financial provision that helps you cope with an unexpected adversity. It provides you financial security, a guarantee that ensures you will not face a financial crisis in case something unavoidable happens. The basic principle governing the concept of insurance is that the insured will pay a certain sum of money to the insurer, who assures a reimbursement whenever the insured seeks protection for losses. The insurer undertakes the risk of ensuring complete protection to the insured through a policy that entails payment of a fixed amount of money in distributed installments, periodically, and the fulfillment of certain stipulations.

Insurance as a concept was noticed among certain sections of society in the past. History has evidence of instances where Romans practiced certain forms of insurance. These practices were similar to the benefit societies of today. For example, the Roman Collegia offered provisions for burial and also for promotions among soldiers. The similarity is basically in the process of accepting a stipulated sum of money from members to perform certain services. Instances of marine loans made to ancient Greeks have also been recorded by Demosthenes. Chinese, apparently, have records of insurance practices that existed 2500 years ago. However, in all these cases, insurance was not practiced on a large-scale. Gradually, the concept waned, and we witnessed a revival of insurance only a few centuries ago.

The insurance practice of today includes four main branches – marine insurance, fire insurance, life insurance, and casualty insurance. The first three forms of insurance provide an indemnity in case of disasters. The fourth, previously known as accident insurance, incorporates all aspects that are not covered by the other three branches.

The oldest of all the modern insurance forms is marine insurance. It dates back over seven centuries. Apparently, it was practiced in the Mediterranean and has been an established practice for centuries, which continues till today. Fire insurance is the second oldest form of insurance that has been permanently established. It dates back to the great London fire of 1666. Life insurance followed fire insurance a little later. However, it has been an established practice only since 1760, when a company was founded to administer life insurance policies. The origin of casualty insurance is owed to the insurance offered to people for accidents during a railway journey. It has been in practice since the first half of the nineteenth century, when it originated in England.

Insurance as a concept has evolved radically over the years. Insurance practices of today include many different sub-categories and contain a lot more clauses than before.