Insurance is based on the principle of large numbers.It is known that if an individual bears a risk on his/her own,the burden would be too much to bear.If the risk is borne by a large group of people,it becomes manageable.This act of bringing people with similar risks together to share the losses from such risks is called poolingofrisks.This is the basis on which the insurance industry operates.
This is an agreement between two or more parties which has legal consequences and is therefore legally enforceable.
CONDITIONS FOR IT TO BE VALID.
- It must be for a legal purpose-not ones that are prohibited by law e.g. bhang
- The parties must have legal capacity to contract i.e. not under 18, insane,bankrupt,or lacking legal capacity to contract.
- The terms and conditions of the contract should be acceptable to both insured and the insurer.
- There must be a payment and a consideration-The payment is usually inform of premiums paid by the insured while the consideration is the insurance cover that the insured gets from the insurer.