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POI Bcom 3sem

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10 views

POI Bcom 3sem

Uploaded by

khaleelmd495
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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PRINCIPLES OF INSURANCE

LONG ANSWERS
(1) Life and Non-Life Insurance
Life Insurance General Insurance
1) Nature of Contract It is not contingent contract It is contingent contract
Life Insurance Policy is to
The objective of General Insurance
2) Objective provide protection and encourage
is to provide security against risk
the investment of saving
It is long term contract and its It is a short term contract and its
3) Period &
premium remains fixed premium varies with renewal in
Premium
throughout the contract contract
Under this policy, actual loss
Under this, actual loss can be
occurred on the death of a person
measured. Therefore insured is paid
4) Indemnity is not possible to measure,
with the amount equal to the extent
because of this, an insured
of loss occurred
amount of policy is payable
Risk associated with life of the
Risk of loss increases with passage
5) Risk individual increases with growing
of time
age of a person
Amount of policy is paid either to
Full amount of policy is paid
the extent of loss suffered by an
6) Amount of Claim either at event of maturity or
individual or the sum assured by
death which ever is earlier
party whichever is low
No such specifications is made
It contains a specified amount of
7) Surrender value regarding surrender value or paid up
surrender value or paid up value
value
8) Reserve for It does not maintain any reserve It maintains reserve for unexpired
Unexpired Risk for unexpired risk risk

(2) Principles of Insurance.


Insurance may be described as a social device whereby a large group of individuals through a
system of equitable contributions may reduce or eliminate certain measurable risk of economic
loss common to all members of the group.
Principles : 1) Principle of Insurance Interest – It is one of the legal principle of insurance
contracts that supports the principle of indemnity. An insured should satisfy the requirement of
insurable interest while collecting the amount by providing the loss due to misused peril.
2) Principle of Indemnity – It states that the insurer should not pay more than the actual amount
of loss. In other words, it states that the insured should not make profits from the loss incurred
by him. Several property and casualty insurance contracts are the contracts of indemnity.
3) Principle of Sub-rogation – It is one of the legal principles of insurance contract and
supports the principle of indemnity. This principle provides the benefit to insured to claim the
insurer for any loss incurred due to the negligence of third party. The insurer then can proceed
against the third party to recover the loss paid to the insured.
4) Principle of Contribution :- Contribution refers to the insurer’s right who has paid
compensation for the loss under a policy, to recover a specific amount from the other insurers
who are supposed to cover the loss. The principle of contribution supports the principle of
indemnity.
5) Principle of Utmost Good Faith :- Insurance contracts involve information asymmetries
between parties. Generally, the insured has a better idea about the risk to be insured than the
insurer. The principle of utmost good faith specifies that both the parties should openly and
honestly disclose the information without concealing any material facts that may affect the
judgement of the other party.
6) Principle of Proximate Cause :- It is a legal term that describes how exactly the loss
occurred. One should establish the cause of a loss as only risks particularly against can be
compensated. The dominant and effective cause will be taken into consideration if there exists
more than one cause for a loss. Thus, remote cause will not be considered here.
SHORT ANSWERS

(3) Reinsurance :- It is termed as insurance for an insurer or insurance company. Most of the
insurance companies are willing to share the risk of bearing high losses of insured with other
insurers, which is called reinsurance. It is commonly observed in general life insurance
companies. In return of risk, insurers need to pay a premium to reinsurer.

(4) Surrender Value :- It is the concept of insurance policy, the term ‘surrender’ refers to the
willing termination of a contract by a policy holder. The insured has a right to terminate his
contract at anytime before the maturity of policy. Surrender value is the amount payable by the
Insurance Company to insured for surrendering his policy. It is paid after deducting all the
essential surrendering charges. If once the policy is surrendered, it means that insurance
protection given under the policy will be stopped and also the life coverage provided by the
company will come to an end.

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