Q.4:- Describe various types of insurance and examine the nature of risks protected by each type of insurance.
Insurance may be classified as follows
(i) Life Insurance A life insurance policy protects against the uncertainty of life though its scope has now widened to suit the various insurance needs of an individual like disability insurance, health/medical insurance, annuity insurance and life insurance proper. Life insurance may be defined as a contract in which the insurer in consideration of a certain premium, agrees to pay to the assured, or to the person for whose benefit the policy is taken, the assured sum of money, on the happening of a specified event contingent on the human life or at the expiry of certain period. There are various types of life insurance policies like
(a) Whole Life Policy
(b) Endowment Life Assurance Policy
(c) Joint Life Policy
(d) Annuity Policy
(e) Children’s Endowment Policy
(ii) Fire Insurance Fire insurance is a contract whereby the insurer, in consideration of the premium paid, undertakes to make good any loss or damage caused by fire during a specified period up to the amount specified in the policy. The fire insurance policy is generally taken for a period of one year after which it is to be renewed from time to time. A claim for loss by fire is considered valid only if it satisfies the following two conditions
(a) There must be actual loss; and
(b) Fire must be accidental and non intentional. The risk covered by a fire insurance contract is the loss resulting from fire which is the proximate cause of the loss. If damage is caused due to overheating without ignition, it is not regarded as a fire loss within the meaning of fire insurance and the loss cannot be claimed from the insurer.
(iii) Marine Insurance A marine insurance contract is an agreement whereby the insurer undertakes to indemnify the insured in the manner and to the extent thereby agreed against marine losses. Marine insurance provides protection against loss by marine perils or perils of the sea. There are three things involved in marine insurance
(a) Ship or Hull Insurance Since the ship is exposed to many dangers at sea, the insurance policy is for indemnifying the insured for losses caused by damage to the ship.
(b) Cargo Insurance An insurance policy can be issued to cover against the risks to cargo while being transported by ship. These risks may be at port i.e., risk of theft, lost goods or on voyage etc.
(c) Freight Insurance Shipping company is insured under freight insurance for reimbursing the loss of freight to the shipping company if the cargo does not reach the destination due to damage or loss in transit.