Insurance Details PDF

Detailed Explanation of Insurance What is Insurance? Insurance is a contract between you (the insured) and an insurance company (the ins and the company promises to compensate you for financial losses caused by specific Principles of Insurance 1. Utmost Good Faith: Both parties must provide hon...

Detailed Explanation of Insurance What is Insurance? Insurance is a contract between you (the insured) and an insurance company (the ins and the company promises to compensate you for financial losses caused by specific Principles of Insurance 1. Utmost Good Faith: Both parties must provide honest and accurate information. Example: You must disclose all health issues when buying health insurance. Consequence: If you hide an illness, your claims might be rejected. 2. Insurable Interest: You can insure only things that financially affect you. Example: You can insure your car but not your friend's car. 3. Indemnity: Insurance compensates you only for actual losses and not for profit. Example: If your phone worth Rs.20,000 is stolen, the company will pay only Rs.20,0 4. Proximate Cause: The insurer will pay only if the loss is due to a reason mentioned Example: Fire insurance won't pay for earthquake damage unless it's explicitly cove 5. Subrogation: Once the insurance company compensates you, they can claim the lo Example: If a drunk driver damages your car and the insurer pays for repairs, they c 6. Contribution: If you have multiple insurance policies, the claim will be shared amon Example: Two health insurance policies will split hospital expenses proportionally. 7. Mitigation: The insured must take reasonable steps to reduce loss or damage. Example: If your house is on fire, you must call firefighters instead of letting it burn Functions of Insurance 1. Providing Certainty: Insurance provides financial security against unexpected even Example: A health insurance policy ensures you don't worry about hospital bills. 2. Protection: Protects individuals, businesses, or properties from significant losses. Example: Fire insurance compensates if your shop burns down. 3. Risk Sharing: Losses of one person are shared by many through premiums. Example: A pool of insured people funds claims for accidents. 4. Capital Formation: Insurers invest premiums in industries, promoting economic gr Types of Insurance 1. Life Insurance - Provides financial support to your family if you pass away or gives you money afte Types of Life Insurance Policies: a. Whole Life Policy: Coverage for your entire life. Example: A family gets Rs.50 lakh if the insured passes away at any age. b. Endowment Life Assurance Policy: Pays either after the term ends or on death. Example: If you survive 20 years, you get the insured amount. c. Joint Life Policy: Covers two people (usually spouses). Example: Benefits are given when one spouse dies. d. Annuity Policy: Gives you regular payments after retirement. Example: Rs.10,000 per month for life after retirement. e. Children's Endowment Policy: Provides money for children's education/marriage Example: Rs.5 lakh paid when the child turns 18. 2. Health Insurance: Covers medical expenses like hospital bills and surgeries. Example: If you're hospitalized for surgery costing Rs.1 lakh, the insurer pays Rs.80 3. Fire Insurance: Covers damage caused by fire. Example: A shopkeeper's store is destroyed in a fire. The insurer pays for reconstru 4. Marine Insurance: Protects goods and ships during sea transportation. Types: a. Ship or Hull Insurance: Covers the ship against damage. b. Cargo Insurance: Protects goods being transported. c. Freight Insurance: Ensures shipping company receives payment if goods are los Merits of Insurance 1. Financial protection during emergencies. 2. Reduces stress by managing unexpected expenses. 3. Encourages long-term savings (life insurance). 4. Promotes economic growth through investments. Demerits of Insurance 1. Regular premium payments may feel burdensome. 2. Exclusions can limit coverage. Example: Floods not covered in basic fire insurance. 3. Lengthy claim process. 4. Risk of claim rejection if rules are not followed.