Risk-transfer mechanism guaranteeing full or partial financial compensation for the damage caused by one or more events beyond the control of the insured. Under an insurance contract, one party (the insurer) indemnifies the other party (the insured) from a certain amount of loss resulting from certain events occurring within a certain period of time, provided that a premium rate is paid. In general insurance, compensation is normally proportional to the damage incurred, while in life insurance a fixed amount is usually paid. Some types of insurance (eg product liability insurance) are an integral part of risk management and mandatory in several countries.
However, the insurance only offers protection against material losses. It can not guarantee business continuity, market share or customer confidence and can not provide knowledge, skills or resources to resume operations after a disaster. The use of insurance against insurance is very important from a contractual point of view, although it may sound very similar and have very different meanings in the legal context.
Hedging means protection against loss or damage, usually by buying insurance. If a contract provides for the person to insure something, the contract requires the person to take out insurance to secure that asset. The warranty is very similar, as it means guaranteeing or guaranteeing something, although it is not particularly important to do so through insurance. If a contract provides that a person must ensure that something is taken care of, there is no need to take out insurance. Rather, the person must do “everything possible” to make sure something is taken care of.
The responsibility of the party varies greatly depending on the word used and its legal obligation. Make sure that the correct use of insure vs. Whenever you make sure you use it in your legal documents, you should always remember it. An incorrect execution can lead to unexpected and potentially significant costs.