Insurance: Introduction & Importance.
What is Insurance:-
In today's world everybody is surrounded by risk and uncertainties. Everyone has fear of losing their valuables, whether he is the richest person in the world for any normal human being. Human being has always been protected about his belongings. To secure himself and his property is the ultimate goal of one and for that Insurance provides a way. Insurance is one of the methods for providing security-financially, materialistically and emotionally. Insurance is as old as our civilization. Rig Veda has identified insurance as “Yogshem”. Insurance is that weapon through which humans can turn uncertainties into certainties and can lower the risk. Insurance is a means of protection from financial loss. Insurance is a term in law and economics. It is something people buy to protect themselves from losing money. People who buy insurance pay a "premium" and also promise to be careful.
In the words of Justice Tindal, “ Insurance is a contract by which a sum of money is paid to the assured consideration of insurer's incurring the risk of paying a large upon a given contingency.”
In other words, the insurance is the word used for dost contracts where the insurance is liable to indemnity only in the case of loss for property or goods otherwise not.
Terminologies of Insurance:
1. Insured: The party or individual who protect against specified risk and who is entitled to receive payment from the insurance company on the event of happening. And insured is normally a policyholder.
2. Insurer: The party which promises to pay indemnity to the insured on the happening of any contingency is known as insurer. The insurance is an insurance company.
3. Premium: The amount which paid to the insurer by the insured inconsideration to insurance contract is known as premium. It may be paid monthly, half yearly or on the annual basis. It is the price of insurance policy.
4. Subject matter of insurance: The property or life for which the insurance is taken is known as subject matter of the insurance.
5. Under insurance-When the insurance coverage of a property is less than actual value of risk of the property insured.
6. Over insurance: When a insurance coverage of a property exceed the actual cash value of the risk of the property insured.
7. Double Insurance: When an insured purchase more than one policy for the same subject matter from the different insurers is known as double Insurance.
8. Re-insurance: when the insurance company ensure the risk with some other insurance company or when and insurer in order to reduce his risk obtain reinsurance of the risk.
9. Insurance policy- The document which contains terms and conditions of the insurance contract and which is issued by the insurer to the insured.
10. Assurance: This word is used for those insurance contract where there is an assurance from the insurer to make the payment of the policy either on the maturity or on death.
11. Paril: A paril is an event that causes a person our property -loss by fire, premature death sickness, accident etc.
12. Nominy: The person or party to whom the policy proceeds will be paid in event of death or happening of any contingency.
Types of Insurance:
1. Life Insurance:-
The life of men are insured in life insurance. In this subject matter of insurance is the human life. Life Insurance is a contract, where by the insurer, in consideration of a premium paid either in lump sum or periodical installments, undertake to pay an annuity or a certain sum of money either on the death of insured or on the expiry of certain number of years.
A contract off Life Insurance, as in other forms of insurance, requires that the assured must have at the time of contract insurable interest in his life upon which the insurance is affected. Life Insurance business are done by LIC, Kotak Mahindra, Bajaj Alliance, ICICI, etc.
2. Fire Insurance:
Fire insurance is a contract to indemnity, to the insured for destruction of or damage to property caused by fire. A fire insurance policy is usually taken for 1 year's only according to the terms of policy. The scope of insurance is much wider because in this risk directly involved by the Fire is not only included, but lightening, explosion, aircraft damage, riot strike, malicious, terrorism, storm, cyclone, typhoon, tornado, flood, impact damages are also included.
The importance of fire insurance is going more in modern industrial age because insurance minimises losses, decrease in the probabilities of fire losses and increase in the growth of business.
3. Marine Insurance:
The business of effecting, cargoes, frieghts and other interest which may be legal insured in or in a relation to such vessels, cargos and frieght, good wares, merchandise and property of whatever description insured for any transit by land or water or both are covered in marine insurance policy.
There are two types of marine insurance:-
1) Ocean and
2) Inland.
4. Social Insurance:
The social insurance is to provide protection to the weaker section of the society who is unable to pay the premium for advocate insurance. Pension plans, disability benefit, unemployment benefit, sickness insurance and industrial insurance are the various forms of social insurance. With the increase socialistic ideas, the Government of the country must provide social insurance to its masses.
According to National labour commission,“ Social insurance is defined as an economic security to the weaker section of the society who is unable to pay the premium for adequate insurance."
The following types of insurance can be included in social insurance:-
1. Sickness insurance:
This type of insurance medical benefits, medicine and reimbursement of pay during the sickness period etc. are given to the insured person, who fell sick. The subsidiary companies of general insurance corporate issue 'Med Claim Policies' for this purpose.
2. Death insurance:
Economic assistance is provided to the dependents of the assured in case of death during the employment. The employer can transfer such liability by getting insurance policy for his employees.
3. Disability insurance:
There is a provision of compensation in case of disability total or partial. According to Employee compensation act, the responsibility to pay compensation is vast with the employer. But the employee transfer is liability on the insurance by taking group insurance policy.
4. Unemployment insurance:
In case the insured person becomes unemployed due to certain specified reasons, he is given economic support till he gets employment.
5. Old age insurance:
In this category of insurance, the insured or his dependent is paid, after certain age economic assistance.
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