.No. Particulars Page No.

1. Introduction To Insurance 1.
2. Role And Importance Of 2,3.
Insurance
3. Insurance Contract 4,5.
4. Fundamental Principles Of 6-17.
Insurance
5. Bancassurance 18,19.
6. Difference Between Life 20-22.
Insurance And General
Insurance
7. Bibliography 23.

Introduction To Insurance
Life and property is subject to risk and uncertainties. Certain risks can be
minimised- through systematic planning and timely action. For instance, a
machine accident can be averted by its timely maintenance. However,
there accidental. They take place unexpectedly. In such instances,
businessmen and others suffer huge loss to their assets and property.

It is to be noted that there are two categories of risks. Insurable Risks and
Non- Insurable Risks. The insurable risks includes loss due to fire, theft,
flood, earthquake, civil riots and other risks. The non- insurable risks
include loss due to changes in fashions, and technology, loss due to
competition, bad debts, and so on.
 Role And Importance Of Insurance
Financial Support To Family Of Deceased
The life insurance provides financial assistance on the death of the
insured person.

Medical Support
The insurance also provides medical support in the case of mediclaim
insurance policies. The insured also gets a lumpsum amount in the case of
accident resulting in permanent disability.

Recovery Of Loss
The insured can recover or claim the lost property and goods due to
the happening of an uncertain event.

Means Of Savings
Life insurance is means of saving. The assured can save the money under
salary savings scheme by paying a regular premium.

Provision For Old Age

The endowment policies provides a provision for old age, as the insured
can get a lumpsum on the expiry of a certain period.

Facilitates Economic Development

The insurance companies invests money which is collected by the way of
premiums. They purchase share and debentures of the companies. They
also provide loans to industries.

Source Of Employment
Insurance companies provide a number of employment facilities directly in
the insurance sector. They are also responsible indirectly for the number of
jobs in the industrial and other sector.

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Tax Relief
Premiums paid are eligible for tax exemption. The policy holders can claim
insurance premium as tax- deductible expense.

Loans To Policy Holder

The policy holders can get housing loans in the case of life insurance
policies.

Less Tension To Businessman

Businessman can conduct their business operations with less tension as
they are protected against losses due to the happening of uncertain events,
such as damage to goods due to fire, theft, etc.

Insurance Contract
Definition
“An insurance contract is an agreement between the insurer and the
insured under which the insurer undertakes to compensate the insured for
the loss arising from the risk insured against at a consideration called
premium”.

Essentials
Just like all other contracts, a contract of insurance must have the following
legally needed features. The contract of insurance must satisfy all elements
of a simple contract, which are as follows :

1. There must be an offer or proposal on one side and its acceptance on

another side.

2. The agreement must be in writing by competent presons. Competent

person is one who is above the age of 18 years and is of sound mind.

3. ‘Premium’ is a consideration that must be paid, for entering into an

insurance contract.

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 4. The object of the contract should be lawful, it should not be unlawful.

5. Parties to the contract must enter into contract with a free consent. No
one should force anyone to enter into a contract. The parties should not
practice fraud, misrepresentation and coercion to enter into a contract.

6. The event must involve element of uncertainty. Uncertainty means the

event must not be sure to happen, it may take place or it may not take
place.

7. The subject matter should be at risk.

8. The risk should not be very small.

9. The risk must be capable enough to be calculated on the basis of past

records so that the premium can be fixed.

Fundamentals Principles Of Insurance

Insurance is a contract between insurer and insured. Principles of
insurance are the elements which are needed in an insurance contract to
make it valid, if these elements are not present in an insurance contract,
then the contract becomes invalid.

Following are the principles of contract of insurance:

1.Principle Of Utmost Good Faith

a) “utmost good faith” is one of the basic principle of insurance.

b) The contract of insurance must be made in full good faith by both the
parties.

c) Utmost good faith means the insured must provide to the insurer
complete, correct and clear information about the subject matter of
insurance and the insurer must also provide to the insured. Complete,
correct and clear information about the terms and conditions of the
contract.

d) Both the parties must provide all the information related to contract to
each other, no one should hide anything related to contract of
insurance.

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 e) Any fact relating to the contract should not be hidden by both the
parties.

f) This principle is applicable to all types of insurance such as fire,

marine life insurance, etc.

g) A contract of insurance which is not based on the principle of utmost

good faith is not a valid contract.

h) If the insured does not provide to the insurer complete, clear and
correct information of the subject matter of the insurance at the time
of taking the policy, then legally insurer can avoid his responsibility to
pay compensation.

i) For e.g.: At the time of taking fire insurance policy, a businessman

does not provide true information about the previous occurence of fire
in his factory and after taking the policy there is an another fire, the
insurance company can refuse to pay the compensation, if it comes
to know about the previous occurance of fire which was hidden by the
trader at the time of taking the policy.

j) If the insurer does not provide complete and correct facts about the
amount of premium, way of payment, amount of payment and other
details, the contact of insurance becomes invalid.

k) Insurance is taken to protect against any unexpected loss and not for
profit. Hence, correct information must be given to the company.

2. Principle Of Insurable Interest

a) Principle of Insurable Interest means the insured must have the subject
interest in the matter of insurance. A person is said to have such
interest when the physical existence of the object of insurance gives
him gains but if the object does not exist then he shall suffer direct
financial loss.

b) In all case of insurance, insurer must suffer some kind of financial loss
due to damage or non- existence of the subject matter of insurance.

c) For e.g.:

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• Every person has insurable interest in his own life so he has
legal right to insure it.

• A person ‘Mr. A’ who has no insurable interest in the house

belonging to ‘Mr. B’ and as such cannot insure it, because if anything
happens to ‘”Mr. B’s” house then “A” will not suffer from any financial
loss.

d) Insurable interest does not mean the person must be emotionally

attached to a thing but he must be financially attached to the object,
he must suffer loss if the object gets destroyed.

e) The owner of the property has an insurable interest as long as he owns

it, if he sells the property, he does not have insurable interest in it
because if the property gets destroyed he will not suffer any financial
loss, some other person who has bought it will suffer the loss. So, he
cannot claim compensaton as he has already sold it. However, in all
cases, to have an insurable interest in the property, it is not
necessary to own it.

f) For e.g.: A banker gives loan on the security of a person’s house, he

has an insurable interest in it because if anything happens to the
house, the banker may suffer loss if the person does not pay back the
loan.

g) When insurable interest must be present:

• In life insurable interest is related to the life insured, the

insurable interest must exist at the time of taking a life insurance policy.

• In fire insurance and general insurance, the insurable interest

must be present at the time of taking the policy and also at the time of
occurance of loss.

h) The principle of insurable interest is applicable to all contracts of insurance.

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i) A contract of insurance without insurable interest is legally invalid.

3.Principle Of Indemnity
a) Indemnity means “ a guarantee to pay for, the loss occurred ”.

b) This principle is applicable to fire, marine and general insurance. It is

not applicable to life insurance contracts because the loss of life
cannot be measured in terms of money. While when the goods are
destroyed, we can say what was the value of the goods.

c) According to the principle, the insurer agrees to compensate the

insured for the actual loss suffered by him. The actual amount of
compensation is limited to the amount assured or the actual loss
suffered whichever is less.

d) For e.g.:

• If Mr. A, insures his house worth Rs. 5 lakhs for Rs. 1 lakh, and
if the entire house is destroyed by fire, then Mr. A can claim only for 1
lakh.

• Motorcycle is insured for Rs. 1 lakh and if only a part of it is

damaged worth Rs.20,000, then, the owner of the motorcycle can
claim only Rs. 20,000 as his loss is only worth that amount.

e) Hence, insurance is for protection not for profit making. The

compensation paid in insurance cannot be more or less than actual
loss.

f) The object of every contract of insurance is to place the insured in

same financial position, as nearly as possible, after the loss as if the
loss had not taken place at all. It would be against public policy to
allow an insured to make profit out of the happening of a loss or
damages. This is because, if the insured will be allowed to make
profit, then, he might purposely bring out the event insured, to get
money and earn extra profit. To control all the above situations, the
principle of indemnity is has been made.

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 g) A contract without indemnity, expect life insurance contract, is an
invalid contract of insurance.

4.Principle Of Contribution
a) This principle is applicable when the insured has taken out more than
one policy on same subject matter.

b) Under this principle, the insured can claim the compensation form
any one or from all insurers. In case, any one insurer pays the full
amount of loss covered by the policy, after paying it, he can claim
proportionate contribution of claim from all other insurers.
Proportionate contribution means all the insurers have to contribute
money in the proportionate to of the amount of policy insured with
them.

c) This principle is applicable to all policies expect life insurance

policies.

d) The right on contribution arises when:

i. A person takes more than one policy for the same subject
matter.

ii. This policies covers the same risk which caused the loss.

iii. All the policies must be in force at the time of the loss.

iv. And one of the insurers has paid to the insured more than his
share of loss.

5.Principle Of Loss Minimization

a) According to this principle, when the event occurs, the insured must
take all necessary steps to minimise the loss. He must act as if he is
not insured and take full care to reduce the loss.

b) For e.g.: If a fire occurs, the insured must take proper steps to stop it
from spreading and save the property as far as possible.

.
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 c) If an insured does not try to minimize the loss, then the insurer can
avoid the payment of loss by saying that the loss occurred due to
insured’s negligence. Negligence means the insured pay attention to
save the property.

d) In short, under this principle, the insured is supposed to minimize the

loss on the happening of an event, but he is not supposed to do so at
the risk of his life.

6. Principle Of Subrogation
a) The general meaning of the word subrogation is the replacing of one
person for another. According to this principle, after the insured is given
compensation for the loss suffered by him due to damage of property
insured, then the right of ownership of such property will pass on to the
insurer.

b) This principle is applicable only to fire, and marine policies. The application
of the principle of subrogation is based on the principle of indemnity.

c) Once, the insurer pays the full compensation to the insured for the damage
suffered by him, the insurer gets all the rights to take the damaged property
from him. This is done because, in many cases, the property has some
value even after it is damaged and if that property is left with the insured,
he may make profit by getting full compensation from the insurance
company and also by selling it.

d) This principle prevents (stops) the insured from making profit out of loss
suffered by him.

e) When the insurance company pays a part of compensation or when the

policy is not taken for the full value of the property, then insurance
company cannot claim such rights. In such cases, the insured has to give a
letter of subrogation to the insurance company. The insurance company
keeps the letter safely as proof and in case it becomes aware that the
insured has cheated the company, it can take legal action against the
insured for recovery of the profit made by him.

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f) In short, in principle of subrogation, the insurer steps into the shoes of the
insured, only when he has paid the amount of the policy to the insurer.

7 .Principle Of Causa Proxima

a) The term causa proxima means the nearer cause.

b) Under this principle when the loss has been caused by s series or
chain of causes, the nearest cause must be taken into the account to
determine whether the insurer has to compensate the loss or not. If the
nearest cause is insured in the contract, then the insurance company has
to legally pay the compensation. If the nearest cause is not insured in the
contract, then the insurance company is not supposed to pay for the
damage or loss.

c) For e.g.:

a) Goods in a ship are destroyed by sea water flowing in the ship

through a hole made by rats. Here, there are two causes of damage of
ship.

The risk of sea-water is insured and the ship is not insured. The nearest
and direct cause of damage to goods is sea-water.

Hence, the insurance company will have to pay the compensation.

8. Risk Must Attach

a) The subject matter should be at a risk of loss. The insurer gets the
premium in a contract of insurance for running, certain risk. If for any
person the risk is not run, the insurer must return the premium.

b) For e.g.: If a person insures his goods for marine insurance which
are kept in godowns then the goods are not a risk of damage by sea
dangers. Hence, there is no risk for the insurer so he has to pay back
the premium to the insured.

9. Period Of Insurance
a) An insurance contract clearly mentions the term or period of time it covers.

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b) Generally, the contract of life insurance is a continuing contract with the
condition that the premium is to be paid at regular periods. If the
premium is not paid regularly, the contract becomes invalid and can
be started back after fulfilling certain conditions as given in the
contract. Other contracts of insurance like fire and marine may be for
a particular period or a particular journey. A contract of life insurance
is for a minimum period of one year.

c) The insurer is legally responsible to pay compensation for the loss insured
only till the term or period of time of the policy, and not after that.

d) For e.g.: If a person takes fire policy for 1 year and no fire takes place in 1
year, but the fire takes place after the term of policy ends, then the
insurer company will not pay his claim as the period of policy has
ended.

e) The claim is paid only if the insured event occurs and some damage takes
place during the period of insurance only.

Bancassurance
Today, banks have been more active in insurance business.
Bancassurance is one of the important ways for creating business for
insurance companies and it is one of the income generating activities for
universal banks. Universal banks are those banks which offer a wide
variety of financial services under one roof. They are a combination of
commercial banking and investment banking. The European countries and
the USA have already combined banking with insurance. The European
concept of Bancassurance in ‘Alfinanz’ has found acceptance in India also,
according in this banking and insurance services can be given by a Single
Organisation.

Realising the importance of concept of bancassurance the Reserve Bank of

India issued guidelines for entry of banks into insurance business in 2000.
According to which banks can take one of the following:

1) Banks can undertake agency services for insurance companies. They can
sell insurance products for a fee and make this a source of earning.

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2) Banks can set-up Joint venture companies for insurance business.

3) Banks can make investments in insurance companies.

The guidelines are made by keeping in view that since insurance involves
risk coverage banks should not directly take up insurance business or set-
up a separate subsidiary. They should only provide agency services or set-
up joint venture for insurance business. In short, banks should not
independently carry on insurance business.

In simple words, Bancassurance means the sale of insurance,

manufactured by the banks own insurance company, through the banks
distribution channels. Bancassurance not only helps the customers but it
also helps the banks. It helps the banks in generating greater fee income,
maintaining customer’s for a long period of time. Bancassurance gives an
opportunity to banks and insurance companies to make good profits.

In order to carry out bancassurance business universal banks should have

alliance with other insurance companies or the bank should have licence to
carry on insurance business on its own. To make an alliance and to sell
insurance products, a bank needs to fulfill the requirements of IRDA and
other regulatory authorities like SEBI, RBI, Government of India, etc.

Alliance means agreements between banks and insurance companies in

which both of them join their resources together to achieve common
objectives to gain entry to new markets, share the risk, share the profit,
improve competitive positions, etc.

Alliance helps universal banks in reducing the costs, through increased

knowledge on insurance products, economies of scale, increased use of
technology etc. It offers a scope to banks to enter new markets and slowing
down the competitor’s position. It also helps in development, developing
new products and improving the quality of services. All the above benefits
help the bank in achieving its objectives, as a result, the bank earns good
profits.

Today, private sector universal banks are the major players in this field.
Major public banks like SBI, Corporation Bank, etc. have also entered into
alliances with insurance companies. Some of the major banks which have
entered into alliances with Insurance Companies are

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1) HDFC Bank

2) ICICI Bank

3) State Bank of India

4) ING VYSYA

5) Corporation Bank

6) CITI Bank

7) Kotak Mahindra Bank, etc.

LIFE INSURANCE

INTRODUCTION
Life insurance is most commonly used to protect
your family from any financial effects of your and/or your spouse's
premature death. However, it can be difficult to think about or
plan for such an event. And, unfortunately, adequate planning is
often put off until it's too late.

With the British knowing the basics of life

insurance and the things that could help people like the life
insurance industry, they decided to give it a try in the United
States of America. After talking about how they would decide on
coming about with the first life insurance company, they decided
to base it on the well known British model at the time. The first
life insurance company in American soil was founded in the
Southern Colony of Charleston, South Carolina in the year 1735.

Illegal almost everywhere else in Europe, life insurance in

England was vigorously promoted in the three decades following the
Glorious Revolution of 1688. The type of insurance we see today owes it's
roots to 17th century England. Lloyd's of London, or as they were known

13
then, Lloyd's Coffee House, was the location where merchants, ship
owners and underwriters met to discuss and transact business deals.

Risk protection has been a primary goal of humans and

institutions throughout history. Protecting against risk is what insurance is
all about.

Over 5000 years ago, in China, insurance was seen as a preventative

measure against piracy on the sea. Piracy, in fact, was so prevalent, that
as a way of spreading the risk, a number of ships would carry a portion of
another ship's cargo so that if one ship was captured, the entire shipment
would not be lost.

TYPES OF LIFE INSURANCE

There are various types policies of life insurance.There are

issued to meet different and special needs of the members of the
community.The main and important types are as follows:

 Endowment policy:
(a) An endowment policy is a life insurance contract designed to pay lump sum
after a specific term,or on a earlier death.
(b) Typical maturities are ten,fifteen or twenty years upto a certain age limit.
(c) The premium has to be paid till the maturity of the policy if the assured
remains alive.
(d) This policy is suitable for those who wish to save money regularly and plan
to use it after a specific no of years.
(e) This policy is useful to the assured as well as his family members.

 Whole life policy:

(a) Life Insurance, or Whole of Life Assurance (in the Commonwealth), is
a life insurance policy that remains in force for the insured's whole life
and requires (in most cases) premiums to be paid every year into the
policy.
(b) Under whole life policy premiums have to be paid through out the life
time of the assured.
(c) In actuarial science, the actuarial present value of a payment or series of
payments which are random variables is the expected value of the present value
of the payments, or equivalently, the present value of their expected values.
(d) This policy does not give protection to the assured but it gives protection
to his family.

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 (e) It is the cheapest form of policy,because this policy is issued with lower
rate of insurance premiums.
 Limited payment whole life policy:
(a) The whole life insurance is the form of permanent insurance policy.It provides
just what its name implies ,insurance coverage for the entire life of insured.

(b) In case of limited payment whole life policy premiums are payable for a selected number
of years or until death if it occurs within this period.

(c) The assured knows how much amount he will be required to pay no matter how he
lives.
(d) This policy is just similar to the endowment policy as regards to payments of
premiums,as the term is fixed in both cases,but in limited payment policy,the amount
becomes payable only on death of the assured.

Convertible whole life policy:

(a) This plan of assurance is designed to meet the needs of those who are
initially unable to pay the larger premium required for a Whole Life or Endowment
Assurance Policy, but hope to be able to pay for such a policy in the near future.
(b) Policy holders get an option of converting an policy into endowment
assurance or limited payment whole life assurance.
(c) For all people with earned income under Category I and unearned incomes
under Category II, basically Standard and sub-Standard lives attracting EMR classes I
and I.
(d) If the option is used the policy gets converted into endowment policy then
the rate of premium increases.If the option is not used the policy continues as a whole
life policy with the lower rate of premium.

 Joint life policy :

(a) Joint life insurance policies are policies that enables two individuals
to be protected, but the full value of the policy is paid only once at the time of
either insurer's death. This is also referred to as the joint first to die clause.
(b) This is the basic level of a joint life insurance policy. This simply states that
if and when one of the policyholder dies then payout is made. But when the surviving
spouse or partner in turn goes, then no more payment will be made even if the policy has
still not lapsed.
(c) The money assured under this policy on two or more lives is payable at the
end of a fixed or on the first death of any lives assured,whichever is earlier.
(d) Generally partenership firms go in for such policies to provide for the return
on capital of the partner who dies.
(e) This policy is suitable for persons who are employed and have the capacity
to pay regular premiums.

 With or without profit policy:

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(a) Conventional with-profits contracts have a basic sum assured to which
bonuses are added. The basic sum assured is the minimum amount of life
assurance payable on death; for endowment contracts it is also the minimum
lump sum payable at maturity.
(b) With-profits funds employ the concept of smoothing. That is, a
proportion of the profits earned during good years is held back to aim to ensure
that a reasonable return is paid during years of poor performance.
(c) In without profit policy the share in the profits is not given but the rate
of premium is less as compared to with profit policy.
(d) LIFE INSURANCE CORPORATION OF INDIA(LIC) gives good
amount of bonus to its policy holders by way of profit.

 Annuity policy:
(a) Annuities are sometimes described as the opposite of life insurance
because annuities can help you protect against the possibility of living too long and
outliving your resources.
(b) An annuity is a contract under which an insurance company promises to
make a series of payments to a person in exchange for a single premium or a series of
premiums. You can also use a deferred annuity to help you accumulate money for
future use.
(c) These policies allow you to immediately convert a lump sum of money
into a guaranteed payout for as long as you live. Guaranteed payouts are also
available for a certain number of years.
(d) This policy is also useful to those who prefer regular income in their old
age and people who are not able to control their expenses so that they can limit their
expenses.

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  Children’s Endowment policy :
(a) This type of policy may be taken for the provisions of marriage of
children when they achieve a certain age.
(b) It may also be taken to ensure for the education of the children
after the death of the assured.
(c) IF unfortunately their parents die their studies continues
unhampered.
(d) In this the insurer pays annuity payments at the end of selected
numbers of years. Annuity means the amount is payable not at
once but on monthly,quarterly,half-yearly or yearly instalments.

Jeevan sathi policy:

(a) This is an Endowment Assurance Plan issued on the lives of husband

and wife. The plan provides financial protection against death of both
the lives. It pays the maturity amount on survival of one or both the
lives to the end of the policy term.
(b) Premiums are payable yearly, half-yearly, quarterly, monthly or
through salary deductions as opted by you throughout the term of the
policy or till the first death of the lives covered, whichever is earlier.
(c) LIC's Jeevan Sathi offers a single policy for a working couple that not
only covers the lives of both the husband and the wife but also gives a
lumpsum on maturity.
(d) The policy continues even after that due date till the date of maturity.
The same amount of money is payable to the survivor or nominee.

GENERAL INSURANCE
INTRODUCTION:
Insurance other than ‘Life Insurance’ falls under the category of
General Insurance. General Insurance comprises of insurance of property against
fire, burglary etc, personal insurance such as Accident and Health Insurance, and
liability insurance which covers legal liabilities. There are also other covers such as
Errors and Omissions insurance for professionals, credit insurance etc.
17
 Non-life insurance companies have products that cover property
against Fire and allied perils, flood storm and inundation, earthquake and so on.
There are products that cover property against burglary, theft etc. The non-life
companies also offer policies covering machinery against breakdown,there are
policies that cover the hull of ships and so on. A Marine Cargo policy covers
goods in transit including by sea, air and road. Further, insurance of motor vehicles
against damages and theft forms a major chunk of non-life insurance business.

Personal insurance covers include policies for Accident, Health etc.

Products offering Personal Accident cover are benefit policies. Health insurance
covers offered by non-life insurers are mainly hospitalization covers either on
reimbursement or cashless basis. The cashless service is offered through Third
Party Administrators who have arrangements with various service providers, i.e.,
hospitals. The Third Party Administrators also provide service for reimbursement
claims. Sometimes the insurers themselves process reimbursement claims.

Industries also need to protect themselves by

obtaining insurance covers to protect their building, machinery,
stocks etc. They need to cover their liabilities as well. Financiers
insist on insurance. So, most industries or businesses that are
financed by banks and other institutions do obtain covers. But are
they obtaining the right covers? And are they insuring adequately
are questions that need to be given some thought. Also
organizations or industries that are self-financed should ensure
that they are protected by insurance.

TYPES OF GENERAL INSURANCE

 Marine insurance:
(a) Marine Insurance covers the loss or damage of
ships, cargo, terminals, and any transport or cargo by which
property is transferred, acquired, or held between the points
of origin and final destination.
(b) The different terms refer to the difficulties of proving
a loss where there might be no evidence of such a loss. In
this respect, marine insurance differs from non-marine
insurance, where the insured is required to prove his loss.
Traditionally, in law, marine insurance was seen as an
insurance of 'the adventure', with insurers having a stake
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 and an interest in the vessel and/ or the cargo rather than,
simply, an interest in the financial consequences of the
subject-matter's survival.
(c) Marine insurance is a contract under which the
insurer agrees to compensate the insured against
losses,caused due to perils(dangers) of sea.
(d) All principals of insurance is applicable to the marine
insurance.

 Fire insurance:
(a) A fire insurance policy involves an insurance
company agreeing to pay a certain amount equivalent to the
estimated loss caused by fire to the insured, within the time
specified in the contract.
(b) Fire Insurance covers your home's structure, or fixing
and fittings, against hazard and provides you with the
financial resources to replace what you have lost, so that you
can get back to normal as soon as possible.
(c) Fire insurance originated in Germany in the 16th
century.
(d) It is contract of insurance under which the insurer
agrees to compensate the insured against the lost to the
property due to fire.
(e) All types of principles are applicable to fire insurance.

 Motor vehicle insurance:

(a) Vehicle insurance (also known as auto

insurance, car insurance, or motor insurance) is
insurance purchased for cars, trucks, and other vehicles. Its
primary use is to provide protection against losses incurred
as a result of traffic accidents and against liability that could
be incurred in an accidents.
(b) This scheme applies to the victims of hit and run
driver accidents. Where the driver deemed to be responsible
for an accident, leaves the scene and is not traced, the MIB
will consider a claim for compensation in respect of both
property and personal injury damages.
(c) This scheme involves accidents caused by the
negligent driving of foreign motorists. The MIB will under
certain circumstances agree to step in and deal with claims
19
 from innocent victims of such accidents, rather than force
the injured victim to seek compensation from a potentially
uncommunicative foreign insurer. The concept of this
scheme was introduced to the UK as a result of European
Union (EU) legislation.
(d) The importance of this insurance increases day
by day as more and more people are buying vehicles,which
causes more and more accidents.

 Personal accident insurance:

(a) The accident insurance covers loss due to accidents.
(b) The individuals can take accidents insurance policy to
protect against risk to life or disability arising directly from
accidents.
(c) The amount of compensation depends on the amount
insured with the insurance company.
(d) In present times life insurance policies also cover
accident insurance.

 Medical insurance:
(a) Health insurance, like other forms of insurance, is
a form of collectivism by means of which people collectively
pool their risk, in this case the risk of incurring medical
expenses.
(b) By estimating the overall risk of healthcare
expenses, a routine finance structure (such as a monthly
premium or annual tax) can be developed, ensuring that
money is available to pay for the healthcare benefits specified
in the insurance agreement. The benefit is administered by a
central organization such as a government agency, private
business, or not-for-profit entity.
(c) The contract can be renewable annually or monthly.
The type and amount of health care costs that will be covered
by the health insurance company are specified in advance, in
the member contract or "Evidence of Coverage" booklet. The
individual insured person's obligations may take several
forms.
(d) The claim amount depends upon the amount of
medical expanses and type of sickness.

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 Crop insurance:
(a) Crop insurance is purchased by agricultural
producers, including farmers, ranchers, and others to protect
themselves against either the loss of their crops due to
natural disasters, such as hail, drought, and floods, or the loss
of revenue due to declines in the prices of agricultural
commodities.
(b) Crop-hail insurance is generally available from
private insurers (in countries with private sectors) because
hail is a narrow peril that occurs in a limited place and its
accumulated losses tend not to overwhelm the capital
reserves of private insurers.
(c) The National Agricultural Insurance (NAIS) for
crops has been specially introduced since 2000 to provide
insurance cover to small and marginal farmers.
(d) Insurer cover is provided if any crops fail due to
natural calamities like floods,cyclones etc.
(e) This kind of insurance will definitely help the
farmers as they have always been victim of losses due to
natural calamities.

 Fidelity guarantee insurance:

(a) Fidelity insurance protects organizations from loss
of money, securities, or inventory resulting from crime.
Common Fidelity claims allege employee dishonesty,
embezzlement, forgery, robbery, safe burglary, computer
fraud, wire transfer fraud, counterfeiting, and other criminal
acts.
(b) Any business employer needs to be concerned with
Employee Dishonesty or any business handing cash or
securities needs protection from robbery or theft will need
Fidelity.
(c) From fictitious employees, dummy accounts
payable, non-existent suppliers to outright theft of money,
securities and property. Fraud and embezzlement in the
workplace is on the rise, occurring in even the best work
environments.
(d) These frauds can go on for years, and when
discovered the ultimate impact can be enormous. Smaller
companies are especially vulnerable to Fidelity crimes.
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 (e) The insurer pays the loss to the employer as per
agreed terms in the contract.
(f) All principles are applicable to this insurance policy.

 Burglary insurance

(a)‘Burglary’ means to go into a house illegally to steal

its things.
(b) Burglary falls in the category of property insurance.
(c) In case of burglary policy the loss or damage of
household goods and properties due to
theft,burglary,house breaking and similar kinds of acts
are covered.
(d)The actual loss is compensated by the insurance
company.

 Cattle insurance
(a) In cattle insurance a particular amount of money is
given to the insured in the event of death of animals like bulls
cows buffaloes goats etc.
(b) The cause of death of cattle may be accidents or
disease etc The compensation is given by the insurer if death
occurs due to any cause covered in the policy.
(c) This kind of insurance helps the farmers.Generally
farmers buy cattle from their savings.If their cattle die then
they have to suffer huge loss.To reduce this loss,cattle
insurance has been made.

 Cash in transit insurance:

(a)The Insurer under this Policies indemnify the
Insured against loss of Cash, Currency Notes,
Coins, Securities for Money,Postal Orders,Stamps,
and Cheques etc. whilst in transit enroute to final
destination and/or in locked safe.
(b) The Cover is available for the loss of Cash drawn
for the payment of wages,salaries and other

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 earnings or for petty Cash in direct transit from
the Bank to the Insured’s premises.
(c) The cash in transit insurance is important to any
business as large amount of money or cash is
taken out of the bank to meet the day to day
expenses of business and pay wages to
employees.

Difference Between Life Insurance And

General Insurance
Life Insurance General Insurance

1. What Does It Include?

Life insurance includes the General insurance includes all other

insurance of life of an individual. It is
a contract between the
assurer(insurance company) and the
assured (insured person), under
which the assurer agrees to
compensate the assured a certain
amount of money on the expiry of a
certain term, or on death, whichever
is earlier; for a consideration called
‘premium’.
types of insurance except life
insurance. Examples of General
insurance are fire insurance, marine
insurance, health insurance, etc. It is
a contract between the insurer and
insured, under which the insurer
agrees to compensate a certain
amount of money on the happening
of an uncertain event, for a
consideration called ‘premium’.

2. What Is The Subject

Matter? Generally goods, property of any kind
Human life is the subject matter of are the subject matter of general
life insurance contract. insurance.

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3. Indemnity.

Life insurance is not a contract of Fire, marine and other contracts of

indemnity because no one can insurance are contracts of indemnity
measure the value of human life. because the life of goods can be
measured in terms of money.

4. Terms Of Contract.

Life insurance contract is generally Individuals generally take for one

taken by individuals non life year.
insurance for long term. Hence, it is
a kind of continuing contract.

5. Insurable Interest.

Insurable interest must be present In fire insurance, insurable interest

only at the time of taking out the
policy, it need not be present at the
maturity of the policy.
must be present both at the time of
taking the policy and when loss
occurs in marine insurance, it must
be present only at the time when
loss occurs, it need not be present at
the time of making the policy.

6. Insurance/ Assurance.

The term ‘Assurance’ is used for life The term ‘Insurance’ is used to refer
insurance business. other kinds of non-life policies.

7. Surrender Policy.

In case of life insurance policy, it can The marine and fire insurance
be surrendered before its maturity. policies and other general policies
cannot be surrendered by the insured
before maturity.

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8.Why They Are Taken By
Individuals?
Individuals take life policies to Individuals take general insurance
provide protection to their family policies to protect their goods,
members in case something property, etc.
happens to them. Life policies are
also taken for providing for old age,
tax concessions, taking loans, etc.

a) Return On Investment.
Life policies which are made for long
term, provide some amount of
investment. For e.g. 15 to 20% profit
margin.
General insurance policies do not
contain any investment element in
them. They do not offer any kind of
return on maturity.

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