The importance
of insurance cannot be undermined in the present day when uncertainty is prevailing everywhere . In the words of Din scale, no
one in the modern word can afford to be
without insurance. The importance of insurance is not only limited to an
individual or to a family. It is a spread over the entire nervous, systems of business and over the country as a whole.
As such It can be studied under the following headings:
1. IMPORTANCE TO AN INDIVIDUAL: (1). The
main advantage of insurance is to offer
security and safety to the insured against uncertainty. (2).
The insurance protections gives
mental peace to the insured and enables
him to eliminate constant fear about the loss of the his possession.
(3). It included the habits of
savings among the people especially in
the case of the life insurance
(4). It assists the insured to avoid or minimize loss by the making
recommendations through various channels
of advertisements from the insurers.
(5). The insurance policy can be
a pledged as a security for getting loan.
(6). It supplies old-age pensions
to the life policy holders. (7).
Life insurance is a means of the
capitalizations of money. In case of the
assured dies before the maturity of the policy. (8). The assured gets tax benefits u/s 80c in
life insurance. (9). insurance
has made it possible to increased the
efficiency of the insured in determining what risk should be insured against
and what risk he can afford to face himself.
(10). The amount invested in the form of the premium in Life
insurance policies fetches high
returns to assured by the way of the
periodical and maturity bonus.
IMPORTANCE TO BUSINESS.: (1). A
trader can get a bank loan easily if his
stick or property is insured as a insurance providers a sense of security to the lenders. (2). Businessmen can concentrate on their business activities without spending more time on the safeguarding their properties.
(3) . insurance enables the
business to operate in the event of the
loss of properties and human lives as a loss is finally indemnified. (4). The owner of the business concern, by
taking an insurance policy, reduces uncertainty
of business losses and the be sure of his earnings and smooth running of
his business. (5) . Insurance providers
adequate provisions for the grant of the
social security and welfare measures like employees state insurance., life policies old age,
pension, and accident policies for the
benefit or employees . Due to the age pension and accident policies, for the benefit of employees,. Due to these
provision , employees take more interest in the working of the business. (6). The key men insurance providers protections to the industry in case of the death of the
professional executives . (7).
insurance indirectly reduces the cost of manufacturing goods.
(9). The working populations feel
a sense of security if there is an insurance
(10) Rapid industrialization is made possible by the insurance as its
funds are employed in the
development of business and
industry.
IMPORTANCE
TO SOCIETY: (1). Life insurance providers social security to a
family. (2). The insurance fulfils its social obligations by providing employment opportunities to the general public. (3) insurance funds
are employed for the development of basis human facilities like housing, electricity, eater and
sanitation etc., (4). insurance
distributes the loss of few among a
large group of society. (5). insurance has the effect of raising the
standard of living of the people. 4. IMPORTANCE TO NATION: (1). insurance increase national savings. (2). It develops the money market. (3). It contributes to the national
plans. (40. It earns foreign exchange. (5).
It relieves the government from
the liability of providing for the
dependents in the event of the bread winner’s
death. TERMS USED IN
INSURANCE: There are certain terms which
are used by the very often in insurance.
These terms require some explanation.
1. INSURER: The party who agrees to pay compensation to the happening of a contingency is known as
insurers. generally the insurance company
are the insurers. 2. INSURED: The party who has taken a
policy for his life or property in the
insurance company is called insured. 3.
PREMIUM: It is the consideration for which the insurer gives protections to the
insured . It is the price of the insurance cover. (4) POLICY: It refers to the documents which contains the terms are and conditions
of the insurance contract. It is a issued by the insurance company. (5).
INSURED AMOUNT: The amount for
which the risk is insured is called the
insured amount the or policy money or face value of the policy. (6),. PERIL: It is an event the causes a
personal property loss. (7). PROPOSER : The person who sends the proposal
form fro taking an insurance policy is known as proposer. (8). BENEFICIARY: The person
to whom policy amount will be paid in the event of the death of the
assured is called beneficiary . (9). HAZARDS:
It refers to a condition that may
create, decreases of increase the chance of the
from given peril. Hazard, of two types:
(a) Physical hazards, an objective characteristic increasing the chance
of the loss, such as the age, or health
of the an insured person or the locations,. use and constructions, of insured, property, the productions, of gun
powder in a building., (b) Moral hazard:
a subjective characteristic increases the chance of the loss such as s
dishonesty negligence a or
insanity. (10) RISK: It is a defined as a phenomenon
closely associated with the uncertain
events or perils such as a fire,
storms, collision to which the object the is the exposed or a hazard or set a of a hazardous conditions
are a which may be cause a loss
or the probability of a loss or
occurring otherwise. (11).
REINSURANCE: It is a
sub-insurance, which are the insurer may effect if the thinks that the
he has insured a big risk and wants his liability to be shared by others persons in it is a
insured insurers. For example, if insurance company, X insurers a part of
the it with a amount another insurance
company. Y it has be effected a re-insurance. In such as a
case, X will be called the reinsured and Y the reinsurer,. The reinsured can claim the loss from reinsurer only where when he has himself paid the loss the to the insured persons under the original contract. There are a two provides principles
methods of effecting reinsurance cover
.
They are: (a) . FACULTATIVE REINSURANCE: It is a also known as “ Specific Reinsurance” . It is a form which
concerns itself it is the with specific insurance transactions., . It is a necessitates consideration of each risk separately
and accordingly each contract is
a written to be the on its own merit.
(b). TREATY REINSURANCE: The reinsurer
and the direct insurer enter into the a treaty which is the a formal
legally binding agreement that the
former shall concept a accept a sp0ecified portion of any risk covered by the
that the former shall accept a specified
portion of any risk covered by the latter. A treaty embraces future
contractors as well as those in existence at the time the agreement is
executed. Treaty reinsurance may be:
(1). Quota share treaty or fixed
share treaty. (2) Surplus treaty, (3) Excess of loss treaty and . (4). Excess
of loss ratio treaty or stop-loss treaty.
12.DOUBLE INSURANCE: If an
insured insurers the same subject matter
with two or more insurance companies and
the total sum insured is more than the value of the subject matter, it will be
a case of over insurance by the means of double insurance . For example. if a person for Rs. 15 Lakhs each. But being a contract of indemnity , he cannot recover from his insurance more than the amount the of actual loss. The
only benefit of double insurance is than in the event of loss, in the insured
can recover the amount of loss from his insurers in any order he like. It gives him protection
in case one (or More) of his
insurance insurers become insolvent.