Functions of insurance are of two types:
1.Primary functions of insurance
2.Secondary functions of insurance
PRIMARY FUNCTIONS OF INSURANCE
1.Risk transfer: This is the basic reason behind insurance contract.It is a way in which insurers agree to carry the financial burden of the insured in the event of loss or damage of the subject matter of the insurance.
2.Common pool: Through insurance people come together and contribute what is known as premium so that in the happening of loss, whosoever suffers the loss shall be compensated.
3.Equitable premium: The premium to be paid by each policy holder depends on the value of risk introduced into the fund.
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