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Insurance Key Notes for LIC AAO: What is Insurance and its Importance?

Insurance Key Notes for LIC AAO: What is Insurance?

Dear Aspirants,

In the previous article, we have discussed around LIC now moving forward towards preparation for Insurance Exams. Let's discuss Insurance as a general term and it's Importance.


Insurance in simple words is a means by which you can transfer the risk of loss or damage of Goods/Item/Property to another Person/Party i.e. Insurer. This commitment is based on the payment of a charge known as “Premium”. The one who transferred the liability is known as Insured.

The insurer is generally an Organization that is registered under the Insurance Umbrella Act. So basically, Insurance is basically a contract between Insurer and Insured where the Insurer commits to pay a fixed amount to the insured if he pays the premium up to a fixed term. The amount from the Insurer side will be paid in case of happening of a certain event like accident, death. The Insure will compensate the actual loss. This commitment is bound under certain terms and Conditions.

Importance of Insurance:

The Insurance serves as a very useful means for spreading the effects of personal or business. It acts as  a cover to all the risk for any kind of loss. It gives a sense of Security to the Insured. It plays an important role in large Scale Industries as a lot of money is involved so it gives an assurance of security with the payment of small amount as premium.

From the National Point of view, insurance enables saving of Individuals to accumulate with the insurance company by way of premium received. These funds are invested in securities issued by Multi National companies as well as government. Individuals also get benefited who insures their life to cover the risks of death is induced to save a part of their current income.

Insurance Industry also gives employment to many individuals at various levels in Insurance Offices. It gives an opportunity to many people to earn their livelihood.

Preparing for LIC AAO 2016, Try this Mock Test Series

Previous Related Article: Insurance Notes for LIC AAO 2015-16: LIC (Umbrella Acts and IRDA formation)

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