Types of Risks in Service Sector
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Questions and Answers

What is a whole life policy primarily characterized by?

  • The sum assured is paid only after the insured's death. (correct)
  • It runs for a limited time only.
  • It requires no premium payments.
  • Premium payments are made only once.

    • What is the maximum claim amount for fire insurance as stated?

  • Rs. 50,000
  • Rs. 20,000
  • Rs. 25,000
  • Rs. 15,000 (correct)

    • Which aspect does marine insurance specifically cover?

  • Loss or damage to personal property.
  • Loss or damage to ships or cargo during voyages. (correct)
  • Theft of property in residential areas.
  • Liability for accidents caused by cars.

    • What distinguishes an endowment policy from a whole life policy?

    <p>It runs for a limited period or until a certain age.</p> Signup and view all the answers

    Which of the following is NOT considered a type of insurance mentioned?

    <p>Health Insurance</p> Signup and view all the answers

    Why is fire insurance compensation limited to Rs. 15,000?

    <p>Due to insurance policy limits.</p> Signup and view all the answers

    How is a life insurance policy typically financed?

    <p>By paying premiums either in lump sums or installments.</p> Signup and view all the answers

    Which organization previously dominated the life and general insurance market in India?

    <p>Life Insurance Corporation of India (LIC)</p> Signup and view all the answers

    What is one key function of insurance in relation to personal and business risks?

    <p>It spreads the effects of risk among many.</p> Signup and view all the answers

    How does insurance benefit individuals planning for retirement?

    <p>By assuring a fixed amount upon retirement.</p> Signup and view all the answers

    What role does insurance play in the national economy?

    <p>It helps accumulate savings for investment.</p> Signup and view all the answers

    In what way does insurance contribute to employment?

    <p>It creates direct and indirect job opportunities.</p> Signup and view all the answers

    Why do businesses invest in insurance?

    <p>To secure against potential losses.</p> Signup and view all the answers

    How does paying insurance premiums encourage savings?

    <p>It helps individuals set aside a portion of their income.</p> Signup and view all the answers

    What should individuals expect when they insure their lives?

    <p>Financial support in old age and death.</p> Signup and view all the answers

    What assurance do businesses receive by paying for insurance?

    <p>Compensation for any losses that may occur.</p> Signup and view all the answers

    What is the primary purpose of life insurance?

    <p>To meet financial needs of dependents upon the insured's death.</p> Signup and view all the answers

    Which type of insurance specifically covers damage caused by fire?

    <p>Fire insurance</p> Signup and view all the answers

    What does marine insurance primarily protect against?

    <p>Risks associated with marine ventures</p> Signup and view all the answers

    In which type of marine insurance policy does coverage apply only for a specific journey?

    <p>Voyage policy</p> Signup and view all the answers

    What type of insurance would cover personal accidents sustained by an insured individual?

    <p>Accident insurance</p> Signup and view all the answers

    Which type of insurance can cover both a specific period and a specific journey?

    <p>Mixed policy</p> Signup and view all the answers

    What is a characteristic of speculative risk?

    <p>It relates to business judgment based on speculation.</p> Signup and view all the answers

    How is pure risk defined?

    <p>A situation only involving loss and no possibility of gain.</p> Signup and view all the answers

    What does insurance primarily do?

    <p>Shifts risks of loss or damage to the insurer.</p> Signup and view all the answers

    Which type of risk involves the health or life of individuals?

    <p>Personnel Risk</p> Signup and view all the answers

    What is the term for the payment made by the insured to the insurer?

    <p>Premium</p> Signup and view all the answers

    How do insurers manage the risk of individual losses?

    <p>By pooling risks among a large number of parties.</p> Signup and view all the answers

    Which risk is NOT classified as a pure risk?

    <p>Market fluctuations</p> Signup and view all the answers

    Which statement accurately describes property risk?

    <p>It focuses on the loss or damage of physical property.</p> Signup and view all the answers

    What does motor vehicle insurance cover?

    <p>Damages due to accidents, theft, and natural calamities</p> Signup and view all the answers

    Which insurance policy covers loss caused by burglary?

    <p>Burglary insurance</p> Signup and view all the answers

    What is fidelity insurance primarily designed to protect against?

    <p>Financial malpractices</p> Signup and view all the answers

    How is the premium for insurance generally determined?

    <p>Depends on the amount insured and nature of the risk</p> Signup and view all the answers

    In insurance, what is 'insurable interest'?

    <p>A legitimate interest in the subject being insured</p> Signup and view all the answers

    What happens if a policy is surrendered before it expires?

    <p>The policyholder may not receive the full premium amount</p> Signup and view all the answers

    What does liability insurance cover?

    <p>Financial losses from the insured’s negligence or actions</p> Signup and view all the answers

    Which type of insurance covers goods transported by sea?

    <p>Marine Insurance</p> Signup and view all the answers

    What is the principle of utmost good faith in insurance contracts primarily concerned with?

    <p>The mutual disclosure of relevant information</p> Signup and view all the answers

    Which statement best describes insurable interest?

    <p>It requires a financial stake in the insured subject matter.</p> Signup and view all the answers

    Why is the principle of indemnity not applicable in life insurance?

    <p>Loss of life cannot be restored.</p> Signup and view all the answers

    What happens if the insured withholds important information under the principle of utmost good faith?

    <p>The insurer is not liable to pay any claims.</p> Signup and view all the answers

    In a marine insurance contract, when must insurable interest exist?

    <p>At the time of loss or damage</p> Signup and view all the answers

    Which type of insurance requires insurable interest both at the time of taking the policy and at the time of loss?

    <p>Fire insurance</p> Signup and view all the answers

    What is an essential condition for a life insurance policyholder?

    <p>To have insurable interest at the time of taking the policy</p> Signup and view all the answers

    Which of the following statements is NOT true regarding indemnity?

    <p>It can compensate for emotional loss.</p> Signup and view all the answers

    What principle prohibits the insured from profiting from an insurance contract?

    <p>Indemnity</p> Signup and view all the answers

    What must happen when the same subject matter is insured with multiple insurers?

    <p>Claims must be shared proportionally</p> Signup and view all the answers

    What does subrogation allow the insurer to do after compensating the insured?

    <p>Take possession of the insured item</p> Signup and view all the answers

    What action must the insured take after a loss according to the mitigation principle?

    <p>Minimize the loss</p> Signup and view all the answers

    Under the causation principle, what is required for the insured to claim compensation?

    <p>The cause must be related to the insured risk</p> Signup and view all the answers

    What does the principle of utmost good faith emphasize in insurance contracts?

    <p>Transparency between insurer and insured</p> Signup and view all the answers

    When can an insurer deny a claim based on the causation principle?

    <p>If the cause is unrelated to the insured risk</p> Signup and view all the answers

    What is the sum insured in an insurance policy?

    <p>The maximum the insurer will pay</p> Signup and view all the answers

    What is the primary purpose of life insurance?

    <p>To offer financial protection to beneficiaries upon death</p> Signup and view all the answers

    Which type of insurance protects against potential losses due to employee dishonesty?

    <p>Fidelity insurance</p> Signup and view all the answers

    Which of the following is NOT typically covered by property insurance?

    <p>Employee injuries</p> Signup and view all the answers

    What does motor vehicle insurance primarily cover?

    <p>Damage to motor vehicles and third-party liability</p> Signup and view all the answers

    What is a key consideration when choosing an insurance policy?

    <p>The amount of coverage and premium costs</p> Signup and view all the answers

    Which insurance provides coverage against losses attributed to fire?

    <p>Fire insurance</p> Signup and view all the answers

    Which statement about marine insurance is correct?

    <p>It protects ships and cargo from maritime risks</p> Signup and view all the answers

    For an endowment policy, what is true regarding premium payments?

    <p>Premium payments may have a limited term</p> Signup and view all the answers

    What type of coverage does liability insurance provide?

    <p>Financial protection against third-party claims of negligence</p> Signup and view all the answers

    Which of the following is a common risk covered by burglary insurance?

    <p>Loss from robbery or theft</p> Signup and view all the answers

    Study Notes

    Types of Risks

    • Speculative Risk: Involves business judgments that carry the possibility of loss or gain.
    • Pure Risk: Involves situations with only the possibility of loss, such as natural disasters, accidents, or theft.
    • Property Risk: Relates to the potential loss or damage of physical property.
    • Personnel Risk: Concerns the health or life of individuals involved in the business.
    • Financial Risk: Pertains to risks associated with financial transactions and investments.
    • Marketing Risk: Involves the uncertainties related to the marketing of goods or services.

    Meaning of Insurance

    • Insurance shifts the risk of loss or damage to an insurer in exchange for premiums paid by the insured.
    • The insurer is usually an insurance company that must be qualified to share the assumed risk.
    • Insurance functions through cooperation, where many individuals pay premiums, and few may receive compensation during a loss.
    • It acts as an agency that spreads the losses among a larger group, allowing risk distribution.

    Importance of Insurance

    • Insurance offers security by spreading risks among many people, providing assurance for both personal and business needs.
    • It enables savings accumulation through premiums, which can be invested in government or corporate securities.
    • The industry creates employment opportunities directly within insurance companies and through agents.
    • It is crucial for large-scale production, helping businesses manage substantial investments without constant worry about potential losses.

    Types of Insurance

    • Life Insurance:

      • Provides a sum upon death or after a specified period; ensures financial protection for beneficiaries.
      • Two types: Whole-life policy (covers entire life) and Endowment Policy (limited term).

    • Fire Insurance:

      • Compensates for losses due to accidental fire damage up to the policy’s value.

    • Marine Insurance:

      • Covers loss or damage to ships, cargo, and related maritime risks.

    • General Insurance:

      • Encompasses various types such as health, motor vehicle, burglary, accident, and fidelity insurance.

    Key Considerations When Choosing Insurance

    • Type of coverage required to mitigate specific risks.
    • Amount of coverage influences the maximum compensation available.
    • Premium costs vary based on coverage type and risk factors.
    • Insurer reputation matters for claims handling and financial stability.

    Principles of Insurance

    • Utmost Good Faith: Both parties must disclose all relevant information to uphold trust and contract validity.
    • Insurable Interest: The insured must have a legitimate financial stake in the subject of the insurance.
    • Indemnity: Restores the insured to a pre-loss position but is inapplicable to life insurance due to the nature of loss.
    • Contribution: Multiple insurers share claims fairly when the same subject matter is insured with more than one company.
    • Subrogation: After compensation, insurers gain the insured's rights regarding the insured item, allowing them to recover losses.
    • Mitigation: Insured parties must take all reasonable actions to reduce potential losses.
    • Causa-proxima (nearest cause): Compensation claims are valid only when the loss is caused directly by an insured risk rather than a remote cause.

    Summary of Key Insurance Types

    • Life Insurance: Financial safety for dependents upon the insured's death.
    • Fire Insurance: Covers fire-related losses; claims are limited to accidental damages.
    • Marine Insurance: Protects against risks in maritime operations.
    • Burglary Insurance: Safeguards against theft and related financial losses.
    • Motor Vehicle Insurance: Covers incidents leading to vehicle damage or liability in accidents.
    • Fidelity Insurance: Protects businesses against losses from employee dishonesty.

    Employment and Economic Impact

    • Insurance contributes to national economic stability through investment of premiums and providing safety in various sectors.

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    Description

    This quiz covers different types of risks in the service sector, including speculative, pure, property, personnel, financial, and marketing risks. Test your understanding of each type of risk and how they impact businesses.

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