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Functions of Insurance

Insurance has various functions:
  1. Providing Certainty: Insurance presents certainity of payment caused due to the risk of damage. There are accidents of happenings of time and amount of harm. Insurance helps in removing these risks and the assured gets payment of loss. A premium is charged for providing this certainity.
  2. Protection: Another main function of insurance is to give protection from probable possibilities of loss. Insurance cannot stop the happening of a risk or event but can reimburse for damages occurring from it.
  3. Risk Sharing: When the risk event happens, the damage is shared by all the people exposed to it. The share is got from all the insured members as a way of premiums.
  4. Assist in Capital Formation: The gathered funds of the insurer received from premium payments made by the insured are invested in many income generating schemes.

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