Insurance Introduction - Life Insurance with Term Insurance 

 

Insurance means the arrangement provided by the company or the state that undertakes the condition to prove a guarantee of compensation for specified loss, damage, illness or death in return for payment for a specific premium. In life insurance contract, the human life is insured against old age, illness, accident, death, etc. Life contract is not a contract indemnity. Hence the insurer has a reimburse a definite sum on the maturity or completion of policy.

It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. An insurer, or insurance carrier, is selling the insurance; the insured, or policyholder, is the person or entity buying the insurance policy. The amount of money to be charged for a certain amount of insurance coverage is called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.

The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnity) the insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated.

Principles of Insurance

The main objective of every insurance companies contract is to give financial security and protection to the insured from any certainties in the future. Insured person never should try to break their trust and belief and never should misuse the great opportunity they have.

But there are still few profit seeking opportunist who intent to report false occurrences violating the terms and conditions of an insurance contract.

These type of actions seem to break the trust among the insurance company and the  insurer and results to several breaching of contract and invitees legal penalties.

Thus, to avoid several false occurrences, insurance company always investigates any doubtable insurance claims. So, the insurer should always keep their records safe and sound and should not be annoyed by the procedure to be gone while claiming for the insurance.

Here are few principle of Insurance that should be understood properly beforehand.

1.       Nature  of contract

Nature of contract is the most fundamental principal of the contract provided by the insurance company. The insurance company must explain the insurer about the nature of the insurance to be taken in the detailed manner and the insurer should never hesitate to ask the questions they have in mind to be clear about the nature. The insurance contract later only comes into existence when the offer provided by the insurance company is accepted by the insurer.

2.       Principle of utmost Good faith

In this principal, the topic hangs among the faith that the insurance company and insurer has within both of them. Both the parties should be faithful to each other. Any fraud or misrepresentation of facts can result to dismiss or cancellation of the contract itself.

3.       Insurable Interest

This is one of the most essential requirement of the Insurable interest means that the person opting for insurance must have pecuniary interest in the property he is going to get insured and will suffer financial loss on the occurrence of the insured event.   This is one of the essential requirements of any insurance contract. An insurable interest must exist at the time of the purchase of the insurance. For example, a creditor has an insurable interest in the life of a debtor, A person is considered to have an unlimited interest in the life of their spouse etc

4.       Principal of indemnity

To "indemnify" means to make whole again, or to be reinstated to the position that one was in, to the extent possible, prior to the happening of a specified event or peril. According to this principle, the insurance contract should be such that in case of loss due to the eventualities mentioned in the contract, the insured should be  neither better off nor worse off  after receiving the insured amount.

5.       Proximate Cause

Proximate cause literally means the ‘nearest cause’ or ‘direct cause’. According to this principle, the principle is applicable when the insurer faces the loss which is the result of two or more causes. This cause means the most dominant and most effective cause of loss which is highly considered.

6.       Double Insurance

Double insurance means the insurance of the same subject manner with the company itself under two different policies or with two different companies itself. This insurance is possible in case of indemnity contract like property, fire and marine insurance.

7.       Subrogation

This principle of subrogation enables the insured to claim the amount from the third party responsible for the loss. It allows the insurer to pursue legal method against the third party to recover the amount the loss that the insurer has to face. For example. If insurer gets into an accident due to the recklessness of the third party, the insurance company insures that we take the legal action against the third party and get our compensation for the loss we had to handle.

Types of Insurance

1. Auto insurance

2. Gap insurance

3. Health insurance

4. Income protection insurance

5. Casualty

6. Life

7. Burial insurance

8. Liability

9. Credit

 

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