Insurance is an arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage illness or death in return for a payment of a specified premium.
Type of insurance
Now, let’s see which are the different types of insurance there are two types of insurance
1) life insurance:
Life insurance is a contract to a certain sum of money on the death of a person in consideration of the certain annuity for his life calculated according to the probable duration of life.
Life insurance is a contract in which one party agrees to pay a given sum of money upon the happening of a particular event contingent upon the duration of human life in consideration of immediate payment of the smaller sum.
Types of life insurance
A) Term Insurance: It is the pure insurance form it pays your nominee it is the sum insured in case of your demise within the policy term it does not have any sum assured or maturity amount premium is very low.
B) Endowment Plan: These are insurance and investment plan. a certain portion of the premium is paid for the protection of the life and rest amount is invested in low risk that is so at the time of maturity the insured person gets a predefined amount.
C) Unit-linked insurance plans ( ULIP ): These are newly introduced plans a couple of decades ago they were launched you lives offer life protection as well as the opportunity for capital appreciation by investing in various funds of varying degree of risks. just like endowment policy in you lives a certain portion of the premium cause in providing life cover they generally invest in equity market therefore the return is not predefined. it depends on the market return it has certain lock-in period say three years or five year up to that time you cannot withdraw the insurance.
2) General Insurance ( Non-Life Insurance )
General insurance or non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a particular financial event. General insurance typically comprises any insurance that is not determined to be life insurance.
It is called property and casualty insurance in the U.S. and Non-Life Insurance in Continental Europe.
Types of general insurance
A) Health Insurance: A general health insurance plan is an indemnity plan that pays for hospitalization expenses up to the summit short while you can avail a standalone health policy family flow to plan provide coverage to all the members of your family.
B) Motor Insurance: Motor insurance covers your vehicle against accident damage theft vandalism and so on. the form of insurance comes in two forms comprehensive and third-party. Comprehensive covers 360 degree of your car when a third party gives you protection from third party damages happen to do to your vehicle
C) Home Insurance: A home insurance policy protects your home and its belongings from the damage suffered due to man-made or natural disasters some home instances insurance policies also provide coverage for temporary living expenses in case you are leaving your rent due to your home undergoing the renovation.
D) Travel Insurance: A travel insurance policy protects you against losses suffered due to loss of damage Baggage, delays in flights and trips cancellation when you are travelling abroad in some cases if you are hospitalized while travelling our travel insurance may also offer cashless hospitalization.
Principles of Insurance
A) Principle of Utmost good faith: According to this principle the insurance contract must be signed by both parties ( i.e insurer and insured ) in an absolute good faith or belief or trust they should not hide anything from each other.
B) Principle of Insurable Interest: the principle of insurable interest states that the person getting insured must have an insurable interest in the object of insurance that means you cannot get the insurance policy for the neighbour’s car or for the neighbour’s kid you shall have the insurable interest in the property or the person where you are invested taking the insurance plan the
C) Principle of Indemnity: According to the principle of indemnity, an insurance contract is signed only for getting protection against unpredicted financial losses arising due to future uncertainties that means that the role of the insurer is to provide the good to the loss happened.
C) Principle of Contribution:
- It applies to all contracts of indemnity if the insured has taken out more than one policy on the same subject matter
- according to this principle the insured can claim the compensation only to the extent of actual loss either from all insurer or from anyone insurer
- if one insurer pays full compensation then that insurer can claim protection proportionate claim from other insurers. so if your car has 100,000 rupees of principle indemnity then you can take maximum up to that amount.
D) Principle of Subrogation: According to the principle of subrogation, when the insured is compensated for the losses due to damage to the to his insured property then the ownership rights of such property shifts you to the insurer.
E) Principle of Loss Minimization: According to the principle of loss minimization insured must always try his best to minimize the loss of his insured property in case of certain events like a fire breakout or blast etc. you shall call the insured person shall call the police or the fire brigade and he should put all his efforts to minimize the loss to the product or the property.
F) Principle of Cosa Proxima ( Nearest Cause ):
- proximate cause is concerned with how the loss or damage of the actual print happened to insured party and whether it is a result of an insured peril
- It looks for what is the reason behind the loss is that he is an insured peril or not.
Difference Between Life insurance And General Insurance
|Key Point||Life Insurance||General Insurance|
|Meaning||It is an insurance contract, which covers the life-risk of the person insured.||Anything which is not covered under life insurance like motor, house, health etc.|
|Form||It is a form of investment.||It is only a contract of indemnity.|
|Term||long term||short term|
|Premium||Premium has to be paid over the year.||Premium has to be paid a lump sum.|
|Insurance claim||Insurable amount is paid either on the occurrence of the event or on maturity.||Loss is reimbursed, or liability will be repaid on the occurrence of an uncertain event.|
|Insurable Interest||Must be present at the time of contract.||Must be present, at the time of contract and loss both.|
|Policy Value||It can be done for any value based on the premium policy.||The amount payable under life insurance is confined to the actual loss suffered.|