Purpose of Insurance

The primary purpose of insurance is to spread the financial losses of insured members over the whole of the insuring community be compensating the unfortunate few from the fund contributed by all members. It is important to know that while insurance exists to fight or combat risk, there are some commercial, legal and moral issues to consider which may make it almost impossible to insure every risk. To contract insurance, therefore, you must ensure that the following essential elements exist:

§  Insurable Interest

§  Financial value (not sentimental Value)

§  Large number of similar risks

§  Must know the mathematical value of risk or loss

§  Loss must not be catastrophic

§  Loss must be reasonable expected

§  Loss must be accidental or Fortuitous in nature

§  Loss must be consistence with public policy