Risk is distributed by insurance

Insurance can be defined as the co-operative scheme of distributing risk among the persons who are exposed to it. In ancient period, risk used to be distributed at the time of loss. But at present, risk is distributed among insured at the time of insurance contract because premium is determined at the time of contract. So we can say that risks are distributed by insurance which is one primary function of insurance.

Insurance provides protection

One of the basic function of insurance is that it provides protection. Why insurance? it's because everybody wants to be secure and there are different threats around and nobody knows what will happen next moment. I mean that everybody is surrounded by risks. So people wants protection and thats where insurance comes in and so insurance basic function is to provide protection.

Insurance Provides Certainty

If there is uncertainty then there is the risk. Accidents cannot be predicted beforehand like when or where it will happen, how it will happen and what amount of loss will be and so on. Now here comes the role of insurance, insurance provides certainty against uncertainties to the property and life. This is because insurance company promises to compensate the losses to the insured property caused by uncertainties. Similarly it promises to pay the assured amount in case the pre-matured death of the insured person. Thus insurance company turns the loss of uncertainties into certainty by taking premium form person and institution.

Primary function

The primary function of Insurance are:
1.Provides Certainty
2.Provides Protection
3.Distribution of Risk

Function of Insurance

The insurance business has become popular these days and the business is an important part of every nation economic growth. The basic function of insurance is to provide financial security to the people. But there are also other functions of an insurance company which can be grouped as :
1. Primary Function
2. Secondary Function
3. Other Function