Insurance Companies – definitions and functions
What is an Insurance Company?
An Insurance Company may be defined as a financial institution that is involved in the protection of persons and objects against risks. These companies as financial institutions collect large sums of money called premium from individuals and organizations in order to insure lives and properties.
People save money with the insurance companies in form of life assurance which is paid to them after a period of time if they do not die before then under endowment assurance policy. On the other hand, under the whole life assurance, bulk of money is paid to the beneficiaries of the assured after his death.
Functions of Insurance Companies
- Protection of persons and objects under different types of insurance like motor vehicle, fire, burglary, marine, life assurance, etc.
- They serve as a pool of risks; that is they are an umbrella under which all forms of risks are covered.
- They offer both short and long-term loans to individuals, organizations, etc, from the money they collected from their clients as premiums.
- Through the money and capital markets, they make funds available to industry and commerce thereby contributing to the development of nations where they exist.
- They offer advice to individuals, organizations, government, etc. on the best way to secure lives and properties.
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