This book was divided in to six chapters.The book is to highlight the present work in its right perspective. Some relevant literature on this type of modeling either in insurance or elsewhere are presented. In the period of dynamic indetermination in science, there is hardly a serious piece of research, which, if treated realistically, does not involve operations on stochastic process. So it is natural to find growing awareness and interest in stochastic modeling every where. An insurance system can be defined as a mechanism for reducing the adverse financial impact of random events that prevent the fulfillment of reasonable expectation of human beings. This system covers both property and human-life values. An insurance contract promises to make good to the insured a certain sum in consideration for a payment in the form of premium from the insured. Insurances can be classified in to two divisions namely life insurances and non life insurances. The non life insurances cover motor, health, fire, marine etc. A stochastic insurance model would be to setup a projection model which looks at a single policy, an entire portfolio or an entire company.