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Business Services Module 2/2

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Mudit Sahu
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17 views9 pages

Business Services Module 2/2

Uploaded by

Mudit Sahu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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BUSINESS SERVICES

MODULE 2/2
Meaning of insurance and its
Principles
• Insurance is a contract under which one party (Insureror
Insurance Company) agrees in return of a consideration
(Insurance premium) to pay an agreed sum of money to another
party (Insured) to make good for a loss, damage or injury to
something of value in which the insured has financial interest as a
result of some uncertain event.
• Principles of Insurance:
• 1. Utmost Good Faith: Insurance contracts are based upon
mutual trust and confidence between the insurer and the insured.
It is a condition of every insurance contract that both the parties
i.e.insurer and the insured must disclose every material fact and
information related to insurance contract to each other.
• 2. Insurable Interest: It means some pecuniary interest in the subject matter of
insurance contract. The insured must have insurable interest in the subject
matter of insurance i.e., life or property insured the insured will have to incur
loss due to this damage and insured will be benefitted if full security is being
provided. A businessman has insurable interest in his house, stock, his own life
and that of his wife, children etc.
• 3. Indemnity: Principle of indemnity applies to all contracts except the contract
of life insurance because estimation regarding loss of life cannot be made. The
objective of contract of insurance is to compensate to the insured for the actual
loss he has incurred. These contracts ‘provide security from loss and no profit
can be made out of these contracts.
• 4. Proximate Cause: The insurance company will compensate for the loss
incurred by the insured due to reasons mentioned in insurance policy. But if
losses are incurred due to reasons not mentioned in insurance policy than
principle of proximate cause or the nearest cause is followed.
• 5. Subrogation: This principle applies to all insurance contracts which are
contracts of indemnity. As per this principle, when any insurance company
compensates the insured for loss of any of his property, then all rights related to
that property automatically gets transferred to insurance company.
• 6. Contribution: According to this principle if a person
has taken more than one insurance policy for the same
risk then all the insurers will contribute the amount of
loss in proportion to the amount assured by each of
them and compensate for the actual amount of loss
because he has no right to recover more than the full
amount of his actual loss.
• 7. Mitigation: According to this principle the insured
must take reasonable steps to minimize the loss or
damage to the insured property otherwise the claim
from the insurance company may be lost.
Concept of Life Insurance:

Under life insurance the amount of Insurance is


paid on the maturity of policy or the death of
policy holder whichever is earlier. If the policy
holder survives till maturity he enjoys the amount
of insurance. If he dies before maturity then the
insurance claim helps in maintenance of his family.
The insurance company insures the life of a person
in exchange for a premium which may be paid in
one lump sum or periodically say yearly, half yearly
quarterly or monthly.
Types of Life Insurance Policies
1. Whole Life Policy: Under this policy the sum insured is not payable earlier
than death of the insured. The sum becomes payable to the heir of the
deceased.
2. Endowment Life Insurance Policy: Under this policy the insures undertakes
to pay the assured to his heirs or nominees a specified summon the
attainment of a particular age or on his death whichever is earlier.
3. Joint Life Policy: It involves the insurance of two or more lives
simultaneously. The policy money is payable on the death of any one olives
assured and the assured sum will be payable to the survivor or survivors.
4. Annuity Policy: This policy is one under which amount is payable in
monthly, quarterly, half yearly or annual installments after the assured
attains a certain age. This is useful to those who prefer a regular income
after a certain age.
5. Children’s Endowment Policy: This policy is taken for the purpose of
education of children or to meet marriage expenses. The insurer agrees to
pay a assured sum when the child attains a certain age.
Fire Insurance
It provides safety against loss from fire. If property of insured
gets damaged due to property as compensation from
insurance company. If no such event happens, then no
claim shall be given.
Features:
1. Utmost Good Faith
2. Contract of Indemnity
3. Insurable Interest in Subject matter.
4. Subject to the doctrine of causa proxima.
5. It is a contract for an year. It generally comes to an end at
the expiry of the year and may be renewed.
Marine Insurance
Marine Insurance provides protection against
loss during sea voyage. The businessmen can get
his ship insured by paying the premium fixed by
the insurance company. The functional
principles of marine insurance are the same as
the general principles of Insurance.
OTHER INSURANCE

Health Insurance:
With a lot of awareness today, Health insurance has
gained a lot of popularity. General Insurance
companies provide special health insurance policies
such as Mediclaim for the general public. The
insurance company charges a nominal premium
every year and in return undertakes to provide up
to stipulated amount for the treatment of certain
diseases such as heart problem, cancer, etc.

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