Saturday, 24 October 2020

What is Insurance? Know Everything About Insurance

What is Insurance?

Insurance means transferring risk to a third party that would take care of it and if it did happen they would compensate you for that losses. so, when there's a risk there's a return but they can also be losses if there is a loss who takes care of it for you.
What is Insurance? Know Everything About Insurance

Types of insurance


1. Life insurance 

2. General insurance (non-life insurance )


Principles of insurance 


1. Principle of utmost good faith

According to this principle of utmost good faith, the insurance contract must be signed by both parties that are the insurer and insured in an absolute good faith or belief or trust they should not hide anything from each other.


2. Principle of insurable interest 

The principle of insurable interest states that the person getting insured must have an insurable interest in the object of insurance that means you cannot get the insurance policy for the neighbor's car or for the neighbor's kid you shall have the insurable interest in the property or the person where you are invested taking the insurance plan. 


3. Principle of indemnity 

According to the principle of indemnity, this contract is registered/signed for getting protection against unexpected financial losses arising due to future uncertainties. which suggests that the role of the insurer is to provide the good to the loss happened. 


4. Principle of contribution 

⦁ It applies to all contracts of indemnity if the insured has taken out exceeding one policy on the matter of the same subject.

⦁ According to this principle, the insured can claim the compensation only to the extent of actual loss either from all insurer or from any one insurer.

⦁ If one insurer pays full compensation then that insurer can claim protection proportionate claim from other insurers. so, if your car has 100,000 rupees of principle indemnity then you can take maximum up to that amount. 


5. Principle of subrogation 

According to the principle of subrogation when the insured is compensated for the losses because of damage to thee to his insured property then the ownership rights of such property shifts you to the insurer principle 


6. Loss minimization 

According to the principle of loss, minimization insured should always try his best to reduce the loss of his insured property just in case of certain events like a fire breakout or blast, etc. you shall call the insured person shall call the police or the fire brigade and he should put all his efforts to minimize the loss to the product or the property 


7. Cosa Proxima ( nearest cause )

⦁ Proximate cause is concerned with how the loss or damage of the actual print happened to the insured party and whether it is a result of an insured peril

⦁ It looks for what is the reason behind the loss is that he is an insured peril or not

The difference between life insurance and general insurance

Meaning

Insurance life insurance is an insurance contract with covers the life risk of the person insured. whereas the general insurance is anything which is not covered under life insurance like motor house health etc they are general insurance.

Form

Life insurance is a form of investment whereas general insurance is only a contract of indemnity.

Term

Life insurance is for short or long term whereas general insurance is the short term for say for two months one year or three years. 

Premium

In life insurance premium has to be paid over the year however in general insurance premium has to be paid on a lump sum.

Insurance claim
A life insurance amount is paid either on the occurrence one of the event or maturity whereas in the general insurance losses reimbursed or liability will be repaid on the occurrence of uncertain events.

Insurable interest

Life insurance must be present at the time of contract whereas in general insurance the interest must be present at the time of her contract as well as at the time of loss.

Policy value

Life insurance can be done for any value based on the premium policy. whereas into general insurance, the amount payable under the life inch under the insurance contract is to the actual loss suffered so the maximum amount you get is the loss happened.


Types of life insurance


1. Term insurance 

2. Endowment plans



1. Term insurance 

It is the pure insurance form it pays your nominee it is the sum insured in case of your demise within the policy term it does not have any sum assured or maturity amount premium is very low


2. Endowment plans

These plans are insurance and investment plan a certain portion of the premium is paid for the protection of the life and the rest amount is invested in low risk that is so at the time of maturity the insured person gets a predefined amount.


3. Unit licked insurance plans 

These are newly introduced plans a few of decades ago they were launched you lives offer life protection also because of the opportunity for capital appreciation by investing in various funds of varying degree of risks.

 Just like endowment policy in your lives a certain portion of the premium cause in providing life cover they generally invest in the equity market, therefore, the return is not predefined. It depends on the market return it has certain lock-in period say three years or five years up to that time you cannot withdraw the insurance.

Types of general insurance

A. Health Insurance

B. Motor Insurance

C. Home Insurance

D. Travel Insurance





A. Health insurance

A general health insurance plan is an indemnity plan that pays for hospitalization expenses up to the summit short while you can avail of a standalone health policy family plan to provide coverage to all the members of your family.


B. Motor Insurance

Motor insurance covers your vehicle against accidental damage, theft, vandalism and so on the mode of insurance comes in two forms comprehensive and third-party completes you covers 360 degree of your car when a 3rd party gives you protection from third party damages happen to do to your vehicle.


C. Home Insurance

Our home insurance policy protects your home and its belongings from the damage suffered due to man-made or natural disasters some home instances insurance policies also provide coverage for temporary living expenses in case you are leaving your rent due to your home undergoing the renovation.

D. Travel Insurance

A travel insurance policy sees you against losses suffered due to loss of damage Begich delays in flights and trips cancellation when you are traveling abroad in some cases if you are hospitalized while traveling our travel insurance may also offer cashless hospitalization.


Why anyone needs Insurance?

People need insurance for a variety of reasons. people need life insurance, homeowners insurance, flood insurance, auto insurance, medical insurance, long-term care insurance. 

Here you see insurance protects us from the unexpected and from financial devastation for example life insurance do you need. it the answer is quite simple. If there is someone who depends on you financially you positively need life insurance to protect them because what would happen to them if something happened to you because they would lose that income. 

People need homeowners insurance how old is insurance relatively inexpensive especially when you consider how fast the bill can add up should you have fire water or smoke damage and speaking of water damage. 

you also need flood insurance if you live in certain parts of the country because homeowners insurance even though it covers you for water damage like say from a broken pipe. what it doesn't cover you is if there's a flood from the outside meaning though it rains or a river overflows its banks and the water is on the ground and then comes into the home homeowners insurance won't cover you for that only national flood insurance that program will cover you for flood insurance.

People need auto insurance because at some point most people end up having an accident even a minor fender bender can cost thousands and you need that protection to protect you from the costs of damaging someone else's property or someone's injury.

People need medical insurance who needs medical insurance almost everyone because we needed to protect us from catastrophic medical expenses that arise from says a heart attack stroke or cancer as a matter of fact how many people this is strike 70% of Americans alive today at age 65 in retiring have already had a heart attack stroke or cancer that means 7 out of 10 Americans.

Oh, what if they say a couple a husband and a wife that means if each of them has a 70% chance there's a 91% chance that one of them will have some type of major medical event now those are the statistics those are the numbers so why do we engineer insurance quite simple to protect us from the unexpected.

Benefits of Insurance

⦁ Prevent Financial Uncertainties

Secure family against the loss of income of the policyholder due to unforeseen emergencies.

⦁ Prevent Debt Burden

Enables policyholder family to pay off debt like loans - home loan, car loans, etc

⦁ Secure Child's Future

Provide for the increasingly expensive coasts for quality education, marriage, and other aspirations.


⦁ Robust Corpus For Retirement

Save enough capital to maintain your lifestyle when you no longer will be gainfully employed.


⦁ Tax Benefits

Up to Rs.1.5 lac under section 80C of IT acts, 1961 on annual premium.
Up to Rs.1.5 lac as per section 10 of the IT act, 1961 on claims.


Advantages of insurance

  • Rupee benefits paid or services rendered to insured who suffer covered losses.
  • Continuity in operations at or close to the same rate as before the accident.
  • Permits lengthening the planning horizon.
  • Allow the firm to accept more uncertainties in other areas.
  • May contribute to improved performance.

Disadvantages of Insurance

  • Less incentive for loss control
  • The insurer's expected loss estimate will rise, causing premiums to rise.
  • Insurance does not cover all the financial consequences of insured events.
  • Lax attitude towards loss control of insured events is likely to increase the incidence of non-insured events.
  • Exaggeration or false reporting of insured claims
  • Subsequently, premiums may arise or there may be difficult retaining insurance coverage.
  • Insured may benefit, but society does not

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