Insurance Services
(Chapter Notes)
Q: Define Insurance.
Answer: Life is full of uncertainties and risks. Insurance is a means of providing against loss caused by natural or man-made factors. It is a contract or agreement under which one party agrees in return for a consideration (called premium which maybe monthly , quarterly, half yearly or annually) to pay in agreed amount of money to another party to make good a loss, damage, or injury to something of value.
Q: What are the functions of Insurance?
Answer:
(1) Providing certainty
Insurance provides certainty of payment for the risk of loss. There are uncertainties of happenings of time and amount of loss. Insurance recovers these uncertainties and the assured receives payment of loss. The insurer charges premium for providing the certainty.
(2)Protection
The second main function of insurance is to provide protection from probable chances of loss. Insurance cannot stop the happening of a risk or event but can compensate for losses arising out of it.
(3)Risk sharing
On the happening of a risk event, the loss is shared by all the persons exposed to it. The share is obtained from every insured member by way of premiums.
(4)Assist in capital formation
The accumulated funds of the insurer received by way of premium payments made by the insured are invested in various income generating schemes.
(5)Principle of mitigation
It states that it is the duty of the insured to take reasonable steps to minimize the loss or damage to the insured property. For e.g. suppose goods kept in store house catches fire then the owner of the goods should try to recover the goods and save them from fire to minimize the loss or damage.
Q: Name the different types of insurance.
Answer:
① Life insurance
② Fire Insurance
③ Marine Insurance
⒜ Shipor Bulk Insurance
⒝ Cargo insurance
⒞ Freight insurance
Q: What is Life Insurance? Why it is important?
Answer: The life insurance policy is basically a protection against the uncertainty of life. Life insurance may be defined as a contract in which the insurer undertakes to ensure the life of a person in exchange of a sum of money called premium and promises to pay a certain amount on the death of the insured or at the expiry of certain period.
(1) life insurance provide protection to the family at pre-mature death of an individual.
(2) It gives adequate amount at an old age when earning capacities are reduced. It is not only a protection but it is sort of investment as a certain amount is returnable at the time of death or at the expiry of certain period.
Q: What are the main elements of Life Insurance Contract?
Answer:
MAIN ELEMENTS OF LIFE INSURANCE CONTRACT
(1) The contract of life insurance is a contract of utmost good faith.
(2) In case of life insurance policy, a person has assurable interest in his or her own life, in the life of her/his own spouse or in the life of his/her children.
(3) It is not a contract of indemnity. The life of a human being cannot be compensated , only a specified amount of money is paid.
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