Purpose and Need to get Insured

Why should we get insured? What is the need for getting Insured?
These questions are answered in this post.

Assests are insured , because they are likely to be destroyed or made non-functional before the expected life time, through accidental occurences. Such possible occurences are called Perils. Fire, Floods, breakdowns,lightining, earthquakes,etc., are perils. If such perils can cause damage to the assest, we say that the assest is exposed to that risk. Perils are the events. Risks are the consequential losses are damages. The risk to a owner of a building, because the peril of an earthquake, may be a few lakhs or a few crores of rupees, depending on the crores of rupees, depending on the cost of the building, the contents in it and extent the damage.

The risk only means that there is a possibility of loss or damage. The damage may or may not happen. The earthquake may occur, but the bulding may not have been affected at all. Insurance is done against the possibilty that the damage may happen. There has to be an uncertainity about the risk. The word "possibility" implies uncertainity. Insurance is relevant only if there are uncertainities. If there is no uncertainity about the occurence of an event,it cannot be insured againts. In case of a human being, death is certain, but the time of death is uncertain. The person is insured, because of the uncertainity about the time of his death. In the case of a person who is terminally ill, the time to death is not uncertain, though not exactly known. It would be "soon".He cannot be insured.

Insurance does not protect the assest.It does not prevent its loss due to the peril. The peril cannot be avoided through insurance. The risk can sometimes be avoided, through better safety and damage control measures. Insurance only tries to reduce the impact of the risk on the owner of the assest and those who depend on that assest. They are the ones who benefil from the assest and therefore, would lose, when the assest is damaged. Insurance only compensates for the losses and that too, not fully.

If you have any queries or doubts kindly post your valuable comments on this post.