Describe various types of insurance and examine the nature of risks protected by each type of insurance.
Insurance is a contract or agreement under which one party agrees in return for a consideration to pay an agreed amount of money to another party to make a loss, damage or injury to something of value in which the insured has a pecuniary interest as a result of some uncertain event. This writing is called ‘policy’. The person whose risk is insured is called ‘insured’ and the firm which insures the risk of loss is known as insurer/ assurance underwriter.
The various types of insurance are explained below:
a. Life insurance:
I. A life insurance policy was initially introduced as a protection against the uncertainty of life. Gradually its scope has widened and now there are many types of insurance policies available. For example, disability insurance, health/medical insurance, etc.
II. It is a contract in which the insurer in consideration of a certain premium, either in a lump sum or by other periodical payments, agrees to pay to the assured, or to the person for whose benefit the policy is taken, the assured sum of money, on the happening of a specified event contingent on the human life or at the expiry of certain period.
III- There are different types of insurance policies- Whole Life policy, endowment policy, , joint life policy, Children’s endowment policy, and annuity policy.
B. Fire Insurance:
I- Fire insurance is a contract in which the insurer, in consideration of the premium paid, undertakes to make good any loss or damage caused by fire during a specified period up to the amount specified in the policy.
II - It is for a period of 1 year after which it is to be renewed from time to time
III - The premium may be paid either in lump sum or installments.
IV - A claim for loss by fire must satisfy the two following conditions- There must be an actual loss, and the fire must be accidental and nonintentional.
C. Marine insurance:
I- A marine insurance contract is an agreement whereby the insurer undertakes to indemnify the insured in the manner and to the extent thereby agreed against marine losses.
II- It provides protection against loss by marine perils or perils of the sea.
There are 3 things involved in it -
a) Ship or hull insurance: Since the ship is exposed to many dangers at sea, the insurance policy is for indemnifying the insured for losses caused by damage to the ship.
b) Cargo insurance: The cargo while being transported by ship is subject to many risks. These may be at port i.e., risk of theft, lost goods or on the voyage, etc. The insurance policy is issued to cover against such risks to cargo.
c) Freight insurance: If the cargo does not reach the destination due to damage or loss in transit, the shipping company is not paid freight charges. Freight insurance is for reimbursing the loss of freight to the shipping company.
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Which of the following is not applicable in the life insurance contract?NCERT - Business Studies