Insurance Loans

TYPES OF INSURANCE

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 Broadly  speaking there are two  main branches of insurance  in our country, viz.,  life insurance  and General 
insurance . The general insurance 
is subdivided  into three types,
fire insurance , marine insurance  and miscellaneous
insurance  This classifications  is highlighted in the figure given
below:  The above mentioned types of the
have been briefly discussed below:<br />
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 (1).  LIFE INSURANCE: It refers to
a contract in which is the  insurer
agrees to pay a specified  amount of the
on the death of the assured or on the expiry of a certain fixed period,
whichever  is earlier, . In consideration
of this, the insurer  collects
premiums,  from the insured. Since the
sum for which a policy  is take is
assured to be paid, whether there is death or not, Life insurance is also
often  referred to as : Life Assurance”
In  India 
the life business is being undertaken by the Life insurance
Corporation  (LIC), of India and twelve
private insurance companies such as<br />
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(2).  GENERAL INSURANCE:  Except 
life insurance  all other
insurances  come under general insurance  . Before 1971, there were about the 107
general insurance  c9ompanies,  in India both Indian and foreign . These  companies were mismanaged  insurance 
was a meant  for big industrial,
services to clients  was partial, there
were no  service conditions   to staff. In view of these was partial there
were no service conditions or to staff. In view of these limitations  the Govt. of India  has enacted General insurance  Business ( Nationalizations)  Act 1972, to take over general insurance  business. Under the provisions  of the. Act the general insurance  Corporations (GIC) India was established  in Jan. 9173, for the purpose  of a this directing controlling and carrying
a  on the general insurance  business in India. Later all the 107
companies,  were amalgamated and
grouped  into the 4 operating companies
viz., National Insurance Co Ltd.,  H. O.
Calcutta the New India Assurance  Co
Ltd., H. O. Mumbai.,  The
Oriental insurance  Co Ltd., H. O  New Delhi and United India  insurance 
Co. Ltd., H. O. Chennai . These 
four companies  became
subsidiaries of the general insurance 
corporations  of India. These four
companies were established  to achieve
the following twin objectives:  (a) . To
ensure that these are so situated  as to
under render their combined services effectively  and in all the parts of the India and,<br />
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(b) . 
To ensure proper service  to the
public through mutual competitions.  In
1999, the IRDA act introduced a an amendment 
to the General insurance 
Business  (Nationalizations)  Act 1972, 
by which the exclusive 
privilege  enjoyed by the GIC and
its four subsidiaries  for carrying  on general insurance  was removed . (1) FIRE INSURANCE:   This insurance covers risk of fire to the
property because there is a  every
likelihood of fire spreading of the in big factories, godowns houses, shops and
a  ships. The insurance not only covers
risk of fire insurance but also the consequential  losses from such loss.  (2) . 
MARINE INSURANCE:  This is a
oldest from if insurance and covers a are a 
all the marine perils. Due to the marine perils, the ship can be damaged
or destroyed  cargo and can be lost and
consequently  there can be  loss of freight  . Therefore the marine insurance covers  the risk to ship, cargo and freight on the
high seas.<br />
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(3).  MISCELLANEOUS  INSURANCE: 
All other general insurances fall under the miscellaneous  category. It include  Motor insurance, public liability  insurance, product liability insurance,  Professional indemnity insurance, workman
compensations  insurance, personal
accidents insurance, Individual  medi
claim  policy,  Group mediclaim  policy, Overseas mediclaims  policy, Bhagyashree child  welfare policy, Rajeshwari Mahila Kalyan Bima
Yojna,  Burglary insurance, Shop  keepers 
insurance, Jewellery block insurance, Money insurance,  Fidelity guarantee insurance, Neon sign
policy, Duty insurance,  Electronic
Equipment insurance,  Boiler
Explosion  insurance, Machinery breakdown
insurance, Erection  all risks insurance,
Contractor’s  all risks insurance,
Refrigeration insurance. Baggage  
insurance, All risks insurance, Amartya Siksha Yojna insurance policy,
Sahana safer insurance . Householders 
insurance, pedel cycle insurance, Plate glass insurance, Advance loss of
profits policy, Marine cum erection 
policy, sports insurance, Special contingency  policy, Students safety insurance, and a
Rural insurance.</div>
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TYPES OF INSURANCE

Broadly speaking there are two main branches of insurance in our country, viz., life insurance and General insurance . The general ...

MEANING OF INSURANCE

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Insurance is an
arrangement under which  people facing
common risk come together ana make that their small contributions  to the common fund. While it may not be
possible to say in the advance, which person will suffer the losses,  In a town there are 1000 Hero Honda bikes each
valuing Rs. 40, 000 and they are owned by 1, 000 individual.  It is expected   that every year, one bike is totally damaged
in the town due to an accident. Hence, with this element of uncertainty, each
of the 1, 000 bike owner is exposed to the risk 
of losing his bike, the cost of the which is Rs. 40,000. To avert this
loss, all the 1,000, bike owners  decide
to take a policy  in the insurance  company, and pay the Rs., 40 as premium
towards a common has been  loss which may
fall on any one of them the, when a  bike
is a destroyed, the insurance  company
will pay the loss  of Rs. 40,000 to the
owner. Thus, each one of the 1,000, bike owners is making sure of the
getting  Rs. 40,000 by contributions  a meagre amounts of Rs. 40. The loss of Rs.
40,000 is equally  divided  among, 1,000 owners and their co-operations  make it possible against financial ruin.
Against a definite loss of Rs. 40 per year he protected  himself against a possible loss of Rs.
40,000. In a way he pays a price of Rs. 40 to 
purchase protection  to the extent
of Rs. 40,000 against the loss  by
accident</div>
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.FEATURES OF INSURANCE==On the basis of the
definitions  of insurance  given below 
above on can observe the following features.: (1). CONTRACT:  The insurance 
is a  written agreement between
the insurer and the insured wherein  the
insured  makes on the an offer and the
insurer accepts his offer.   (2).  CONSIDERATIONS:  It is a contract which is the insurers  in a considerations  called premium  agrees 
to take a over a  particular risk
of the other party  and promises  to pay the insured or his  nominee 
a certain sum of the money on the happening  of an uncertain event.  (3). CO-OPERATIVE DEVICE:  It is a co-=operative  device under which a group of person who
agree to share the financial  loss may be
through  brought together  voluntarily 
or through publicity or through solicitations  of the agents, . An insurer would be unable
to compensate  all the losses from his
own capital. So by the insuring a   large
number of persons, it is a true policy he is able to pay the amount of
loss.  (4).  PROTECTION FROM FINANCIAL RISKS:   It offers protection to those risks which
can be measured in terms of the money I.e, financial risks.,,<br />
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 (5), CERTAINTY AND CONTINGENCY:  The life insurance  is a 
contract of certainty  as the
insurer has to pay the amounts as compensations 
a to the assured if as he survives till the date of maturity of policy
of or to the nominee, if he dies, earlier, . In order other insurances, the
contingency , namely fire, theft, earthquake, accident or the marine
perils,  may or may not occur. So only on
the happening of certain contingency, payments is made  otherwise no amount is payable  to the insured. (6). INSURANCE IS NOT
GAMBLING: The insurance  cannot be  considerations  as a gambling as the insurer has to indemnify  the loss incurred by the insured on the
happening  or an uncertain event as a
stipulated in the contract of the insurance , whereas  the game of the gambling may either result
into profit or loss.  (7). INSURANCE  IS NOT A CHARITY;  The concept 
of insurance  is a entirely
different from the concept of charity. The charity is offered to the  poor or needy without expecting any considerations  in the form of premium.  (8). 
BASED UPON CERTAIN PRINCIPLES: 
The contract of insurance  is
based upon certain principles such as a insurable interest, utmost good faith,
indemnify , subrogation, causa-proxima, contribution etc.,  (9). 
REGULATED BY LAW: In India , life insurance   and general insurance  are regulated by Life insurance  Corporation 
of India Act  1956, and  General 
insurance  Business  (Nationalization) Act 1972, and IRDA
Regulations. etc.,   (10).  VALUE OF RISK:  Before insuring the subject matter of the
insurance  contract the risk is
evaluation  in order to determine of the
amount  of premium to be charged  on a the insured.  </div>
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LARGE NUMBER OF INSURED PERSONS: Large number if persons have to be
insured to spread to the loss cheaply and smoothly . If only small number of
person are insured, the cost of the insurance 
to each member will  be go up.
Ultimately it will become unmarketable, . Therefore to make the insurance ,
cheaper  large number of persons of
property  have to be brought under
cheaper, large number of the persons property have to be brought under the
umbrella  of insurance . If an insurer
admits more number of persons, the cost of the insurance  will come down automatically  thereby a lower amount  of premium can be charged on the
insured.   (12).  INVESTMENT: 
The amount of premium collected from the insured by the insurer is being  invested 
in different  securities. Such
securities fetch income to the insurer in the form of dividend  and interest. 
The insurer thus, could get a two 
sources of income, The insurance 
premium and the investment income 
which occur over time.</div>
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MEANING OF INSURANCE

Insurance is an arrangement under which people facing common risk come together ana make that their small contributions to the common fu...

MEANING OF FIRE INSURANCE

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 The term “Fire” means   
a visible or glow accompanied  by
heat. In fire insurance, that the term fire means  actual ignition mens., : burning”: The
presences  of flame is a condition  pre-requisite 
., Thus  damage by the smoke  heating, scorching of charring  without actual burning , is not
consideration  as  “Fire”.,  
Secondly  the ignition has to be
fortuitous  or accidental . But the this
applies only to the insured. If a third party wilfully  sets fire to the insured property., it is a
still accidental so far as a insured  is
concerned provided  the third party  is not a acting  with the direct connivance of the insured.,
If they the insured  himself sets fire to
the insured property, it is a certainly not accident,  in fact it is a fraud., However a fire caused
by the negligence of the insured or if he is the his employees will be payable
as so long as a  there is no element of
fraud.<br />
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MEANING OF FIRE INSURANCE:  Fire insurance is a  social device in the  insurer, in return for the premium  paid, undertakes to pay or make good loss
suffered by the insured as a result of a damage caused by the fire to the
property covered by the policy., It is a 
offered for building or a flat furniture 
, fixture, stocks  and loss of
profit (consequential loss)., It is a also 
covers losses the due to lightning 
, aircraft, damage the losses and due to 
terrorist attack, earthquake, riots, strikes, malicious damage.,  floods and landslide., It could be taken by
the  owner  of the premises to be insured., A tenant is
not eligible  to insurer rented premises.
However the tenant had the options  of
insuring the contents of the premises., 
The premium on the value of the property insured.,  </div>
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DEFINITION 
OF FIRE INSURANCE;  According to
V. R.  Bhushan and Prof. R. S. Sharma.,
fire insurance is an agreement 
whereby  one party (the insurer),
in return, for a consideration undertakes to the indemnify  the other party (the insured)  against 
financial loss which he may sustain by reason of certain  defined subject matter being damaged by the
destroyed by fire  or other defined
perils up to an agreed amount., The documents ., which contains the terms and
conditions of the contract of the fire insurance is known as the policy. The
consideration  for the contract of fire
insurance is termed as the premium., The 
subject  matter of the contract of
fire insurance  is the insured property.
The sum set forth in the contract of fire insurance is called the Insured sum.
FEATURES OF FIRE INSURANCE:  The following  are the features of the fire insurance:.  (1). A Fire insurance contract like by the
any other contract  must fulfill the
essential elements of a valid contract like offer and the acceptance., lawful
consideration  legality of object
etc.,   (2).,  A fire insurance contract  is a contract of indemnity.,  This means that in the event of loss, the
insured  can recover from the insurer the
actual amount of loss or not the maximum amount for the which the subject  matter is a insured whichever is less.,  (3). 
In fire insurance, the insured should have been insurable interest in
the  subject matter of the contract  both in the at the time of taking the policy
and the at the time of loss.,  (4).  Premium is a required to be paid the at the
time of taking policy.,   (5). Fire
insurance usually taken for any year duration but in the some cases for short
periods also.,  (6). Fire policies can be
assigned with the prior consent of the insurer.,  (7)., 
The loss must be outcome of fire or ignition only.,  (8). Nothing can be recovered under a fire
policy if the fire is caused deliberately., 
(9). In case of several policies for the same property each insurer is
entitled to contributions from other insurers. After indemnification, the
insurer is subrogated on to the  rights
and interest of the policy holders.,  </div>
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SCOPE OF FIRE INSURANCE==According of section 2  of the insurance act 1938, the scope of fire
insurance includes.,   (a). Fire
insurance business is different from other insurance business operation and
covers the risks caused by fire:   (b) In
addition to the risk cause by the fire, it also includes other reasons and
occurrences,. which can be customarily be included  among risk insured  under fire insurance contracts., Thus we can
be study the scope of fire insurance 
from two angles viz., (1) Ordinary 
scope f fire insurance and, (2), Comprehensive  scope of fire insurance., 1. ORDINARY  SCOPE OF FIRE INSURANCE:  It includes 
only those risks which define the narrower  scope of fire insurance viz., the losses
caused  by fire only. Some losses caused
by the fire and are included  in the
insurance against fire and some  losses
are left out.  (A)., RISKS COVERED UNDER
FIRE INSURANCE:  The risk causing
losses  have to be stated in the fire
policy  and only these risks are
indemnify  are by the insurance company.,
in case of the loss.,  The following
risks caused by the fire are generally included in the fire insurance.,  (a) Fire or ignition: (b)., Blasting of
boiler  used for household  cooking.,  ( C ) Blast of gas etc,. used for the purpose
of lightning  and heating in any  building (not being  an industrial concern or factory using gas
for purpose other than lighting  and
heating).,  Above mention blasts causing
fire must be uncertain and accidental., 
(B) RISKS NOT COVERED BY FIRE INSURANCE:   There are certain risks for the which
insurer do not indemnify the insured  in
case of loss.,  They are as following
.,  (a). 
Loss, durations,  damage to
precious stones and metal artistic goods and 
article ,maps., stamps., cheques., 
account. books archieves  and rate
documents  etc.,  (b)., Loss, destruction or damage caused by
riot.,  civil disturbances , revolutions
, war, aggression, internal emergencies, storms,  cyclones., etc.,  ( C ). 
Spontaneous fire in jungle or bushes., 
(d). Spontaneous  combustion
caused by the chemicals.,  (e) Theft
during fire or after break out the  of
fire.,  (f). Compulsory  burning of goods are or properties  by the orders of Government  or court’s 
decision.  </div>
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COMPREHENSIVE  SCOPE OF FIRE INSURANCE: Numerous fire
policies have been introduced  to cover
various types of the risks allied to the risks of fire. Coverage of such risks
under the ambit of the fire  insurance
has been widened the scope of fire insurance. Some special  policies have helped  in a great way in broadening the scope of
fire insurance in the following manner:  
(A). By including the included perils and risks:   (B). 
By including  consequential losses
and the other indirect fire risks., In the first category such excluded
risks,  which cannot be  insured under general insurance
schemes.,  have been brought under the
cover the of fire insurance. Such policies 
are called  special insurance
relating  to spontaneous  combustion earthquake  blasts., etc.,  In the second category  the indirect 
risks or losses are covered. Such risks are or losses are also  know as par consequential  risks or losses. Expenses after at the
fire  rehabilitation, expenses  of the burnt factory, expenses of reorganizing
the proper  production etc., are some of
the  examples  or such risks or losses. Such risks have been
through  brought under the cover of fire
insurance. Generally  insurance.
Generally consequential  loss insurance
and profit and loss insurance policies cover such indirect  risks., 
HAZARDS IN FIRE INSURANCE:  Fire
loss is the result of two types of hazard: 
(1). PHYSICAL  HAZARDS:  It refers to the inherent  risk of the fire in the property which may be
on account  of the situation,  inflammable nature, constructions artificial
lighting and heating, lack of the  fire
extinguishing  is a appliances,
etc.,  Fire insurance, providers
protections to the property against the occurrence of fire, an unavoidable
physical hazard.  (2).  MORAL HAZARD: The term  Moral Hazard 
refers to the wilful and melicious setting on fire of on the
property  by the owners  or some body else. Moral hazard may be in
anyone of the following forms:  (a) IN
CENDIARISM:  It refers to the deliberate
destruction of one’s own property by fire. Some insured indulge  in such activities  to realize the insured amount from the
insurer.  (b). ARSON: It refers  to setting on fire the property of the
insured by the some other persons. Some persons may set fire to property of
others with a view to getting a reward for information  about the break out of the fire or
assisting  in extinguishing it. ( C ).
PASSIVE DISHONESTY:  It refers to the
wilful neglect to the by the insured to take proper action for
extinguishing  fire and his
carelessness  during the occurrence of
fire</div>
</div>

MEANING OF FIRE INSURANCE

The term “Fire” means a visible or glow accompanied by heat. In fire insurance, that the term fire means actual ignition mens., : bu...

INSURANCE FOR MINOR CHILDREN

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: Since the minors less then age of the 18 are
not competent to contract normally their parents guardians come forward  to insure their lives. Normally deferred
assurance plans are only given to the children so that the risk on their  lives commences afer the age 18 and in some
cases  after age of 12. Mostly all these
plans come under medical unless the deferment period os more than 10 years.  We may have to take a few precautions like
satisfactory personal history of health and also the hereditary reports. All
other members  of the family should have
been covered especially the father and the mother educated and earning. The
socioeconomic  status of the family has
to be satisfactory.<br />
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 The pressure on children due to their school performances
is again  a risk factor to be considered
especially now a  days when there is the
tendency  to commit suicide among the
nonperforming school child. An underweight 
child is an additional risk, whereas 
a slightly obese child is a welcome up to the certain age. For insurance
on minor  children up to age of 25  on the 
basis  of parent’s  income a few restrictions were imposed .
Normally it should be insured that all the members of the family are adequately
insured. The insurer may considered a risk plan on the lives of major children
pursing professional  studies or higher
education in any of the faculty where the loan is sanctioned by a bank or
any  reputed financial institution
without insisting upon the insurance on the life of both the on the life of the
proposer father or mother. This is a 
given because insurance  is
considered as collateral  security
against the loan and certified copies of loan papers and copies of evidence as
to the higher studies are submitted.<br />
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OTHER CONSIDERATIONS: The sum assured age capacity to pay physical  impairments etc, are some of the other factor
in assessing the  risks. Some of these
issues may point out the  certain moral
hazards factors like suicidal tendencies. etc., 
There may be  a necessity for
special medical reports like the x-ray ECG, Tele,  Treadmil, Serum cholesterol, ELISA  tests 
for HIV etc., warranted by the physical conditions  of the proponent a brief descriptions of some
of the above reports is given below: 1. ECG– electrocardiogram with report. 2.
Treadmil   exercise – ECG tracing with
report,  3. Tele– Teleroentgenogram full
size plate, picture to be taken in deep 
inspiration with report.  4. CBC
report on complete blood count.  5. ESR
report on erythrocyte  sedimentation
rate. 6. FBS Blood sugar test report at fasting.  7. PGCS-- blood sugar test report 2 hours
after administrations  of glucose. 8.
SMA– 8 report– this contains the following pathological tests. 1. fasting blood
sugar,  2. cerum creatinine, 3.
serum.  4. serum bilirubin--direct and
indirect.  5. SGOT.  6. SGPT. 
7. serum calcium.  8. serum
potassium.  9.  Serum alkaline phosphates.  10. SMA 
27– contains  27 pathological
tests.  11. Serum cholesterol
report.  SUMMARY. </div>
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  Life insurance  underwriting involves  a lot of the 
issues while assessing the risk like the age, physical fitness., family
history, capacity, to pay etc.,  The
underwriting can be done  under two
heads,  medical and non medical . The
specific group which we under write are also assessed life female proponents,
children who are minors and majors, large sum assured, etc., necessary
precautions  are to be taken for  each group</div>
</div>

INSURANCE FOR MINOR CHILDREN

: Since the minors less then age of the 18 are not competent to contract normally their parents guardians come forward to insure their li...

GROUP INSURANCE

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Before  we discuss group lives underwriting  it is essential to know the differences
between individual  and group insurance.
While  individual insurance is a contract
between  an individual and an insurer
group insurance. is a  contract
covering  a number of lives. While
individual  choose the term, plan or sum
assured of a policy according to his needs, choices and capacity  to pay in the group mostly uniform cover is
granted depending  on so many factors
such as a  group size, occupation, group
profile, including  the death  strain in the group etc., Here there is
a  master policy holder in the form of
the an employer associations  trust etc.,
As we have non medical cover under individual insurance  , we have the free cover limit in the group
insurance on the basis of the simple rules of the insurability  I,e, 
not absent from duty on grounds of illness on the date of commencement
of the scheme and normally no evidence of health is called for up to that
limit. This kinds of mass administration 
and simple underwriting  practice
lead to the low cost  of group insurance.
Group underwriting is done on the basis of group profile, age grouping,
profession of the group etc.,  A part
from the above there is an element in group underwriting namely experience
rating  where the premium rates are
adjusted periodically on the basis of experiences which we shall discuss later
on.  </div>
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GROUP LIVES UNDERWRITING:  Normally this is done for a  year and when the scheme is renewed next year
the insurer gets a fresh data of additions and deletions and on that basis
group underwriting is done.  Since group
underwriting is done  on the basis of
group profile and in each group there are going to be a few lives of
substandard group, the underwriting  may
go for a few safeguards  such as the
following.  1. The group should be
reasonably  homogenous by the nature of
occupation or the profession the members. 
2.  Insurance must be incidental
l  i, e, the group is not to be formed
solely for the purpose of insurance. It should be already existing, .  3. Normally the  group should 
be a dynamic one--where old members go out and new  members come in periodically  (this helps the group to maintain a proper
age profile  instead of being a  stagnant group where are the older  members are being unduly large in
number).  A minimum  size of the group is required  to have proper viability.   DIFFERENT TYPES OF GROUPS:  1. employer– employee groups.  2. 
creditor --debtor  groups.,  3. professional groups.,  4. miscellaneous– co-operative  societies, 
welfare societies,  NGO’s. </div>
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PREMIUM CALCULATION FOR GROUP SCHEMES=The
concept of rebate for large sum assured is not applicable. It depends on many
factors such as a  types of scheme,
amount  of benefits age profiles, and
premium rates  applicable as per the
professional/ occupation of the group. Premium depends  whether it is only risk coverage or it
involves accumulations or funding. Hence 
complete data is required  from
the mas ter policy holder for calculation of premium.  There should be minimum percentage  for example 75% to join the group
insurance  scheme. Otherwise there will
be anti selection against  the insurer i,
e only the old and sick will join the scheme. All new members should
compulsorily  join in order to
improve  the age profile of the group.
Those people  who did not volunteer to
join  the scheme initially  may not be allowed to join a on a later date
to avoid anti selection .  The scale  of benefit usually uniforms  and there is not choice for the
individual  . Some times the groups are
categories  as managerial, supervisory,
clerical and subordinate and accordingly 
different benefits are given  to
different categories.  The insurer always
has a right to call for the medical examination 
if the sum assured exists the free cover limit for a particular  life warrants a medical test. <br />
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EXPERIENCE RATING: Life cover is normally
granted for one year under group schemes and it 
renewed every year providing 
fresh data. This gives oppertunity 
for the underwriting to  revise
the premium on the  basis of the
composition of the group as well as based on the claim experience of earlier
year. This kind of rating on the best basis of claim experience is called
experience rating.  This can be profit
sharing ,  I ,e  returning or adjusting a part of the earlier
year’s  premium for the next year if the
claim experience is favorable or revision of the premium upward of the scheme
is making  losses due to the  more claims. 
Thus, experience ratings is a vital means of adding flexibility to group
underwriting.<br />
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</div>

GROUP INSURANCE

Before we discuss group lives underwriting it is essential to know the differences between individual and group insurance. While indiv...

GROUP INSURANCE PLANS

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 Group Insurance plans are meant to
provide life insurance protection to group of people. The group may be: (I)
Employer- employee group; (II) Labour union group; (III) Creditor- Debtor
group; (IV) Voluntary group like that of teachers, doctors or lawyers.  A master policy is issued under a contract
between the employer and the insurer and the policy includes the names of the
workers and the insured sum of each worker determined on the following basis:
(A) Salary of the employee; (B) Job classification; © Length of the service.
Without medical examination, employees between the ages of 18 and 60 are
covered under this policy which can be contributory or non-contributory. If it
is contributory, both the employer and employees pay the premium.<br />
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The LIC of
India provides the following schemes: (I) Group Savings Linked Insurance
Scheme- It is, in fact, a group term insurance where under contribution is
deducted out of the salary of the member. A portion of the contribution is
utilised as premium to cover term assurance for a fixed sum and the balance
treated as savings which are accumulated at an attractive rate. At present this
rate is 8% p.a. Members exit the scheme on retirement or earlier, death or
resignation. Eligibility: Selected Employer-employee groups such as public
sector corporations and corporates of repute who generally keep a very
methodical reports of their employees. Benefits- (A) on  death while in service. (I) Amount of
insurance cover. (II) Accumulated savings up to the date of death. (B) On
retirement/resignation: (I) Accumulated savings up to the date of exit. Tax
Aspects- (II) Group superannuation scheme: It is designed to provide pension to
employees on their retirement from services.<br />
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<br />
<br />
 The scheme may be financed by the
employer alone or jointly with the employees. A decreasing group insurance
cover in conjunction with super annuation benefits may also e provided under
the scheme. The scheme is of two types: (a) Money Purchase Scheme- The
contributions are fixed generally as a percentage of the salary. The
accumulated value of such contribution is utilised to purchase the pension (b)
Benefit Purchase Scheme- The amount of pension is fixed by the employer in
advance generally in relation to the salary drawn by the employee at the time
of exit.. (e) Joint Life pension payable to the last survivor of the employer
and spouse, with return or capital of death of last survivor. Contributions and
who pays: The maximum annual contribution that an employee can make to the
pension fund the provident fund is restricted by the Income-tax-provisions to
27% of the annual salary (Basic plus D.A). The annual contributions are treated
as deductible business expenses.</div>
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 Mostly the employer contributes, but if so
desired, both the employer and the employees may contribute, in which case the
scheme is called contributory pension Fund scheme. Benefits on Retirement: On
retirement of a member, the corpus (contribution plus interest) is utilised to
provide the following: (a) Commuted value (equipment to 1/3 rd of the corpus)
which is tax free. (b) The corpus that remains after providing for the commuted
value is taken as the purchase price to provide for pension as per option set
above. Tax Benefits- (a) The annual contribution is treated as a deductible
business expense in terms of sec. 36 (I) (IV) of the Income Tax Act. (b) The
employees contribution, in the case of contributory scheme qualifies for
deduction u/s 80c of the Income Tax Act. (III) Group Gratuity Scheme: Under the
payment of Gratuity Act 1972, it is employer’s statutory liability to pay 15
days salary (15/26 of a month wages) for every completed year of service to
each of his employees on their exit, for any reason after five years of
continuous service. In order to provide funds for Gratuity, the LIC of India
has introduced Group Gratuity scheme to the employer. A unique feature of the
scheme is to provide, in the event of premature unfortunate death of employee,
a sum equal to the gratuity, which he would have received on his normal retirement.
Legal and Taxation Angle- Approved Gratuity funds are governed by part C of the
Fourth Schedule to Income Tax Act 1961 and part XIV of income tax Rules 1962.
(a) Employer’s annual contribution shall not exceed 8 1/3% salary (Rule 103).
(b) Employer’s contribution is allowed as business expenses {Section 36 (I)
(V)}. © Employer’s contribution is not treated as perquisite in the hands of
employees (Rule 3c of part C, Schedule IV). (d) Gratuity upto Rs. 3.5 lakh is
tax free {Sec. 10(10)}. How the scheme operates- (a) Contributions (premiums)
received from employer by the insurer are invested as per special guidelines
laid for such funds. (b) The gratuity is paid out of this accumulated fund. ©
Death cover benefit is paid out of a separate term assurance fund maintained by
the insurer. (IV) Group Scheme for Weaker Sections of the Society-<br />
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The Govt. of
India has provided insurance to the weaker section of the society to the tune
of Rs. 5000. Other people may get benefit of this scheme provided they pay @
Rs. 75 per annum to the LIC. Half of the premium will be met by the State Govt.
and Central Govt. as provided in the budget 1995-96. The amount of insurance
has increased to Rs. 10000 w.e.f. 15-8-96. It has been extended to all sections
of people who unable to purchase policies on their lives.</div>
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GROUP INSURANCE PLANS

Group Insurance plans are meant to provide life insurance protection to group of people. The group may be: (I) Employer- employee group; ...

GENERAL RULES OF UNDERWRITING

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A person’s capacity to
pay is one of the every very important factors in granting  life insurance to him. Unless there is a
financial loss due to the death of the person, insurance  cover cannot be granted. It is the insurable
interest which is the under lying criterion 
to decide the extent of life cover. Based on his capacity to pay
premium, the insurer decides the amount 
to be given as the sum assured. This is financial underwriting. PROOF OF
INCOME;  In financial underwriting proof
of income plays a very crucial part. The following documents  can be this is a  considered 
as proof of income.  1. Salary
certificate,  2. Chartered
accountant’s  certificate,  3. Income tax returns with computations of
income statement  of income tax
orders.  4.  Bank 
statements  passbook as a supporting
financial evidence in case evidence in case other documents  are not clear.  5. Land revenue record and certificate  from tahsildar wherever the source of income
is shown as agriculture.  Normally, the
insurer considered is a cover of 20 times the annual income average of the last
3 years. up to the  age of 30, 15 times
up  to age of 40, 12 times up to the age
of 50, and 10 times from age of 51 and above.<br />
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AGE PROOF:  The following  proofs of age are considered as standard  for the purpose of age admission  for insurance. 1. Certificate extract  from municipal or other records made in the
at the time of birth 4. certified extract 
from service register in case of the employees of government and
quasi-government  institutions  and certificates from commercial institutions
and industrial undertakings provided evidence of the age  was produced at the time of recruitment of
the employees.  5. identity cards issued
by the defense departments.,  6.
identify  cards having date of birth
issued by the government quasi-governmnent and commercial and industrial
undertaking to their employees.  7.
marriage certificates issued by the Roman Catholic churches in the case of
Roman Catholics.   8. domicile
certificates in which the date of birth stated was proved on the basis of
school birth certificate. 9. Passport, even in the case of the illiterate
proponents may be accepted as standard age proof.<br />
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  NONSTANDARD 
AGE PROOF: When a standard  age
proof is not available a nonstandard  age
proof can be accepted but with caution. As a matter of fact, the circumstance ,
particularly the status of the proponent the place he is hailing  from etc., 
should be verified before accepting the nonstandard age proof.  The following 
could be nonstandard  age
proof.  1. driving license issued by
RTO,  2. Permanent Account Number (PAN),
issued by income tax authorities., 3. Voter identity  , provided 
the date if issue of the card is available ,  4. ESIS card, 
5. marriage certificate in case of Muslims,  6. service record where the age is not
verified  at the time of the entry into
service only year of the birth is mentioned. 
7. horoscope other than that maintained by the Hindu family of family
horoscope book.,  8. elder’s declaration
,  9. self-declaration, 10. ration
card,  11. certificate issued by village
panchayat. , 12 any other proof not classified as standard.  However a few precautions  should be taken by the insurer while
accepting nonstandard age proofs such as: 
1. age proof extra will bear charges,. 2. normal risk bearing 
plans.,  3. some restrictions for
age  at entry maximum premium paying
term, maximum age at maturity etc.,  In
the self-declaration if only   month is
given , it is taken as 15th of the month. If only year is stated, it is taken
as 1st  July of the year. For widows
falling under female category  of not
having any income , only standard age proof 
can be accepted. </div>
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UNDERWRITING OF PHYSICALLY HANDICAPPED LIVES:’ 1.
Physical impairments as a result of accident, 
2. Physical impairments due to cerebral palsy,  3. Physical impairments due to polio ,  4. 
Physical impairments due to muscular dystrophy.,  5. Physical impairments due to congenital
defect., 6. Physical impairments as a result of underlying  diseases. In all the these cases, the medical
examiner should give full details of the deformity in his medical reports.
Normally these lives are a  considered  only if the they are gainfully employed
having adequate, income of his/her  own
and are capable of taking  sufficient
precautions to avoid  accidents</div>
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GENERAL RULES OF UNDERWRITING

A person’s capacity to pay is one of the every very important factors in granting life insurance to him. Unless there is a financial loss...

FUNDAMENTAL PRINCIPLES

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 (1) PRINCIPLE OF CO-OPERATION:
The insurer  collects premium from the
insured in a  pool and pays their claims
out of the pool. Th insurers  is an
associations  of persons  who pays the claims out fits of it's a pooled
money. Thus insurance  is based  on the principles  of co-operations  . According 
to the Reigal  and Miller,.
“Insurance” is pre-eminently social in nature. It represents  and the highest  degree of co-operations for and mutual
benefits,   (2).  PRINCIPLES OF PROBABILITY: The  occurrence 
of risk in each type  of
insurance  is a  estimated 
through of the theory  of
probability  for which the insurer
follows the theory of large  numbers. The
insurers  collect the data of the
previous happening  taking a  large number of years into
considerations  and forms an idea about
the  incidents in future. Life
insurance  company  prepare the mortality  tables and calculate  the premium accordingly.   (3). 
PRINCIPLE OF UTMOST  GOOD<br />
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FAITH OR
UBERRIMAE  FIDEI : insurance contractors  are based upon mutual  trust and confidence  between the insurer and insured. Utmost good
faith requires  each party to tell the
other “ the truth” the whole truth and nothing but them truth”. It means that
the parties  to the contract  must take a full disclosure  of all the material facts and a
information  relating to the contract.
Examples of material facts in various classes of insurance  are: 
Motor: Details of any young driver:. 
Life:  Details  of Heart diseases. The obligations of
disclosing  material facts ends when end
the contracts of insurance , is concluded 
with the insurance  of the cover
not the or a policy and such obligation again arises at the time of renewal of
policy. However in some one cases the insured is exempted  from disclosing  the following material  facts and a as such principles  of utmost good faith does not apply.(a) .
Facts of the common or public 
knowledge.  (b) . Facts which  tend to the reduce the risk.  ( C ). Facts embodies  in the policy itself.  (d). Facts which relate to the law of the
country.  (e). Facts waived of by the
insurer.  (f). facts which the insurer
fails to notice  on a survey, and,. (g).
Facts known after the affecting of the insurance  contractors, . The various  circumstances 
under which the parties may be guilty of breach of utmost good faith are
given below.  (a).  Non-disclosure -omission to disclose  unintentionally.  (b). Concealment intentional  suppressions 
of a fact.   ( C ).  Innocent 
misrepresentation – Inaccurate statement without any fraudulent
intention and.,   </div>
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 (d). Fraudulent
Misrepresentation  Inaccurate statement .
Where there is breach of the duty of the utmost good faith, the contract  may be either void, or voidable at the
insurer’s  potions,. If there is a
fraudulent misrepresentation, the contract is void., But in the case of the
innocent misrepresentation, the premium is returnable .<br />
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(4).  PRINCIPLE OF INSURABLE INTEREST:  For an insurance contract  to be valid the insured should have be an
insurable interest in the subject matter of insurance. The insurable
interest  is the pecuniary interest
whereby the insured is benefitted by the existence of the subject matter and is
prejudiced  by the death or damage of the
subject matter. The subject matter of insurance may be a property or life or
legal liability. The insurable  interest
to be valid must be recognized as such under the law in operation in the
country  and must satisfy  the following conditions: (a). There must be
a physical  object like life or property
as the subject matter of insurance which is likely to be destroyed.  (b). the person desiring to insure (insured)
must lose of gain money if the subject matter is lost or saved from future  events like death or fire etc.,  ( C ). 
The monetary relationship subject 
matter and the insured is recognized in law. (d).  There must be possibility  or chance of a loss due to uncertain future
event.  The insurance contracts  without insurable  interest have no sanctions of the law as they
amount of the speculations.  Generally
the following persons have an insurable interest on the subject matter of
insurance:.  A child has an insurable
interest in the life of his father;.  A
person has unlimited insurable 
interest  in his own life.  A husband has an insurable interest  in the life of his wife.   A wife has it in the life of her
husband.  </div>
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 A creditor  has an insurable interest. to the extent of
his debt, in the life of his debtor. A partner in business  has an insurable interest in the life or
lives,  of his co-partner  or , co-partners.   A company has an insurable interest in the
life of a senior officers whose death may seriously affect the profits of the
company.   The time when insurable
interest should exist  differs  according to the nature of insurance. In life
assurance, the assured should ave 
insurable interest at the time the contract was entered into. In marine
insurance, it is a should be present at the time of loss. But in the fire
insurance, insurable  interest should be
present not only </div>
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at the time of the a taking a fire policy, but also at the
time of loss.  (5).  PRINCIPLES OF INDEMNITY:  The term indemnity  means making up the loss. Literally  it means, “security against damage to then or
loss  or compensations  for loss’. All contractors of insurance
except life and personal accident and sickness insurance, are contract of
indemnity. According to this principle the insured should be placed in the same
financial positions as a far as  possible
after a loss at the occupied immediately before its  occurrence. The insured  will neither gain nor loss. In order other
words, the insurer will pay only the actual loss suffered  by the insured  I, e, 
the insurer will pay not pay  the
assured amount but only the actual loss suffered by the insured.  For example if a person has insured  a cargo for Rs. 40,000 and if a  part of the goods of Rs.  7,000 is destroyed the insurer will pay only
Rs. 7,000 and not Rs. 40,000., Thus this principles ensures are supposed  to be satisfied in full for the
applications  of the principles
indemnity.   </div>
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(a).  The insured has to prove that he will suffer
loss on the insured matter at the time of happening of the event and the loss
is actual monetary loss. (b).  The amount
of compensations  will be the amount of
the insurance. Indemnifications  cannot
be more than the amount insured.  (
C)  If the insured  gets more amount the than the  actual loss, the insurers has right to get
the extra-amount  back.  (d). If the insured  gets some amount  from third party , after being fully
indemnified  by insurers the insurer will
have right o receive the entire amount paid by the   third party</div>
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FUNDAMENTAL PRINCIPLES

(1) PRINCIPLE OF CO-OPERATION: The insurer collects premium from the insured in a pool and pays their claims out of the pool. Th insure...

FUNDAMENTAL PRINCIPLES OF MARINE INSURANCE

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The
following  are the fundamental
principles  or essential characteristics
of marine   insurance contract:  (1) UTMOST GOOD FAITH:  In the contract of marine  insurance, each party is supposed to observed  utmost good faith and to the disclose all
material facts to the other party. By material facts are meant those which are
likely to influence  the judgement  of the other party. For example, the
declaration by the insured of the shipment on deck of cargo which would be the
normally carried  on under deck. The
holding back of the material facts by the party either party is fraud. If the
insurer knows at the time of insuring the policy that the ship has the reached
the destination quite safely which fact the does not the communicate to the
insured, will have to return the premium to the insured.<br />
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  (2). INSURABLE INTEREST:   In marine insurance, the insured  he will have to should  have an insurable interest in the subject
matter. On other words, he must have some recognized relationship with the
subject matter whereby the benefits  by
its is a  safety and suffers loss if the
subject matter is lost,  destroyed by its
safety and suffers loss if the subject matter is loss, destroyed or damage. The
insurable interest must exist at the time of the  loss. though it is a not required at the time
of a taking insurance. The following parties may be said to the have insurable
interest. (a). Cargo owners on their cargo to be shipped.  (b). Shipowner on his ship.  ( C). Shipping company on their  freight receivable.  (d). An insurer on the insured  properties 
for reinsurance. (e). Captain and crew in respect of their wages and
salaries. (f). Lenders of money on bottomry and respondentia bonds to the
extent of their loan and.  (g).
Mortgage  of the subject matter insured
to the extent  of mortgage  money. <br />
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(3).    INDEMNITY : indemnity  is yet a another fundamental principle of
marine insurance. The main  object of his
this principle  is than an insured should
not be allowed to secure a sum by the way of the indemnity  in excess of the loss actually suffered  by him. The indemnity  in cash is to place the insured as far as
a  possible in the same financial
position as occupied by the him before the happening  of the event. However there is one
exception  to the principle of
indemnity  in marine insurance. Some
profit margin in the also allowed  to be
included in the value of goods. This is based on the  assumption that insured  will earn profit when the goods reach at
their destination. (4).  SUBROGATION: In
the marine insurance  whether  the loss is total or partial  the insurance are subrogated  at to all th rights  and remedies of the insured. But in the case
of the total loss, then insurers are entitled to take over the remains
salvage   of the property. If they loss
is partial the insurers acquire an no proprietary  interest in the property. It is to be noted
that insurance insurer’s  recovery is nit
limited to the amount  of claim. They
cannot recover more than what they have paid the insured. If the insured  consider 
his ship not worth while to repair it because the cost of the would
exceed the value of the ship  after
repair he may abandon the ship to the insurer and claims  the sum insured on the basis of constructive
total loss. If the  insurers  accept the abandoned ship, they acquire
proprietary  rights in the ship. If it is
possible to sell the damaged ship with the without repairs for the more than
the insured value, of the insurers  can
make and the retain the profit. But under subrogation  , they can retain only upon the  amount by the have indemnity  the insured.</div>
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 (5). CAUSA PROXIMA:  This principle defines and limits the scope
within which liability  may attach to the
insurer. That insured affirms or negatives the existence of the certain state
of facts.  Warranty  is strictly enforced because of the a breach
of the warranty  ends a contract. There
are two classes of warranty. (a). EXPRESS WARRANTY;  An express warranty is one of which is
expressed or written on the face of the policy itself and imposes  some obligations  upon the insured. Compliance of such a
warranty is essential for a  contract.
For example, package in containers of a standard size.  (B). 
IMPLIED WARRANTY;  An implied
warranty  is always by nature to the
contract  of marine insurance, but need
not be definitely expressed in writing on the face of the policy, . There are
three implied insurance:.  (a)
SEAWORTHINESS:  The ship undertaking
voyage must be reasonably  fit or for
such  voyage. Ship may be seaworthy at
the commencement of the journey. A ship is said to the be seaworthy  when it is has been completely  repaired, the master of the crew and other
staff are present and there is adequate fuel in the ship so that it can be face
the routine sea perils  of the sea. The
seaworthiness  of ship may vary from
situation to situation and from vessel to vessal Seaworthiness  is also worthiness. The ship must be
reasonably  fit and the suitable to carry
the type of cargo  insured and this is
called cargo-worthiness.(b).  LEGALITY OF
THE VENTURE:  The voyage or
adventure  must be lawful and not illegal
such as a smuggling etc., The warranty of legality cannot be waived under any
circumstances.<br />
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  ( C ) .
NON-DEVIATION:  The ship will follow  the proper course/ route or the course
contemplated  by the policy. Any
departure  from such a course is known by
the  policy. Any departure from such a
course is known as deviation. As per this warranty.  There should be no change during the voyage
i9n the ordinary course whether 
intentionally  or otherwise after
the commencement  of the voyage.  there should 
be not delay in voyage. the ship shall not be  deviate from it's a common route in the
ordinary course except  in certain cases
excusable by law</div>
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FUNDAMENTAL PRINCIPLES OF MARINE INSURANCE

The following are the fundamental principles or essential characteristics of marine insurance contract: (1) UTMOST GOOD FAITH: In th...

FUNDAMENTAL PRINCIPLES OF FIRE INSURANCE

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 All the essential elements of a valid
contract  are applicable to fire  insurance contract., but following are the
main principles  of fire insurance
contract. (1). INSURABLE INTEREST:   The
insured should have insurable interest 
in the subject  matter of the
insurance, . Such an interest may arise legally by various of legal
ownership  or equitably ( by virtue  of some other pecuniary  relationship 
following short or ownership) . In fire insurance the insurable interest
must be present both at the time of insurance and at the time of loss. In case
of goods,  insurable interest arises on
the  account of  (Ownership: (b) Possessions:  ( C ). Contract:. Generally the  following persons have  insurable  
interest in the subject matter of 
insurance  in case of  of fire policy:   (a) A person has insurable interest in the
property he owns.  (b) A businessman has
insurable interest  in his stock, plant
and a machinery  and building.  ( C ) . Agent the has insurable interest in
the property of his principle.  (d).
Partner has insurable interest  in the
property of partnership fi8rm., (e) 
Mortgages  has insurable interest
in the property , which is mortgaged.,<br />
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(2). UTMOST GOOD FAITH: According to this principle both insured and
insurer are supposed to disclose all material facts relating  to subject matter or of insurance to each
other. In the case of ordinary  risks,
all the statement made by the insured in the proposal  form are quite sufficient for a  correct 
estimation of the risk. But in complicated  cases, the insurer surveyor makes an
estimation of the property. Any facts open to his observations  are presumed to have been disclosed.  The observance of good faith is
necessary  throughout  the term of insurance. Any contrary behaviour
by either  of the parties will become a
breach of good faith. (3).INDEMNITY: According to this principle  the insurer agrees to make good the loss suffered
by the insured.  The insurer will
indemnify  the actual loss suffered by
the insured  and not more than that.
Under any circumstance., the insured will not be allowed to make profit out of
the  loss. Hence, the insured  shall not be paid anything in excess of loss
or the amount of the policy.<br />
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  (4).  SUBROGATION:’ 
The doctrine of subrogation is a corollary to the principles of
indemnity  . The term subrogation means
the  right of the one person to stand in
place of another . Under the this principles 
the insurer after paying compensations 
has got right to take away the damaged property which  has some value from the insured  as the latter should not be compensated  twice (I , E, 
by selling the damaged property and receiving  compensations 
from the insurer)., for the same loss, . Similarly the insurers, after
settlement of claims, stands in the place of the insured  with all the rights and remedies against the
third parties. For examples, X suffers a lost or Rs. 20,000 by fire, Y the
insurer indemnifies  X up to Rs. 20,000,
X has another alternative to seek compensations . He may claim damage for the
person for those  negligence the fire
occurred. If X prefers to take compensations 
from insurers,  he cannot ask
third  party for compensation . But
the  insurer can recover damage from the
third party because the gets the rights of X after paying  him compensations.  (5). 
CONTRIBUTIONS:  The principles of
contributions applies when there is more 
than only policy covering the same subject matter against  the same peril for the same period  and for the same insured . In such as
cases  the insurer  for the 
after the payment of claims the has the right to recover a
proportionate  amount from other
co-insurer  who are a liable for the
same. In other words each co-insurer has to contributes  the loss rateably to the  insured. (6). CAUSA PROXIMA:  The maxim “causa proximate  not remote 
spectature means  that proximate  nearest cause and not the remote one is to be
taken notice of at the time of the determining 
the liability of the insurer.  The
insurer should try to ascertain the nearest cause of the damage to the property
which is subject matter of insurance, while paying the claim. If the property
insured is burnt is by the fire was preceded and brought  in to the operations by the an expected
peril, the legal position  depends upon
whether excepted  peril was the
proximate  cause of fire or not.<br />
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  PROCEDURE OF TAKING A FIRE INSURANCE
POLICY:  If an individual/ businessman
wants to go get his property insured he has to adopt the following procedure.
(1) PROPOSAL FORM:  First of all the
proposal will have to fill up the proposal from which is collected  from any one of the public sector general
insurance companies such as a New India Assurance Ltd.,  Oriental Fire and General insurance Co. Ltd.,
United India Fire and General insurance Co Ltd., and National Insurance Co
Ltd.,   or from any one of the private
companies.   The proposal form requires
him to give detail such as a name address and occupations of the propose
value  and nature of the property to be
insured, type of the policy required amount of assured sum etc.,  After furnishing these details,. the proposal
will have to put his signature in the proposal 
form and send the same to same to the respective company for acceptance.
(2). EVIDENCE OF RESPECTABILITY: Before 
assuming the risk, the insurer has to ascertain whether the proposer is
a  respectable and person and is taking
policy in utmost goods faith. This precautions is mandatory as the fire
insurance involves a high degree of moral hazard which arises from the
behaviour  of the human beings connected
with subject matter of insurance.  If a
policy is taken with an intention to set fire to the property the insured might
set a  get a lump sum  and make a quick buck out of  it. If the proposer  is a well known person. risk can be  assumed without any enquiry. In case of
the  proposer is a stranger, the insurer
will insist  him to get a certificate
from some known person to prove his 
credibility.<br />
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(3). EVALUATING THE  PROPOSAL:  On receipt of the
proposal  form, the insurers evaluates  the possible loss involved  in the proposal . In case of the subject
matter is of very  high value of the a
surveyor  may be sent to evaluations  the proposal. In this case, the
surveyor’s  report is taken as the basis
for determining  the nature  of risk and a this is a premium. (4).
ACCEPTANCE:  If the insurer is
satisfied  with the proposal  and interested in taking up such risk, it
will send a letter fo the acceptance 
of proposal to the proposer. By this the contract  comes into the existence. The amount of
premium, to be paid to the   is also
mentioned in the letter of acceptance. (5). 
COVER NOTE: After assuming the risk, the insurer will have to send a
fire policy to the insured  . As the
preparation of fire policy  takes
sometimes, the insurer  will issue a
provisional document  known as cover
note.  The cover note is effectively till
the fire policy is issued.  (6).  INSURANCE POLICY:  Later on,. the insurer prepares the fire
policy (to replace the cover note), and sends it to the insured. The policy is
a documents  in which  all terms and condition  regarding 
insurance, are mentioned . Generally 
this policy is issued for one year.<br />
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FUNDAMENTAL PRINCIPLES OF FIRE INSURANCE

All the essential elements of a valid contract are applicable to fire insurance contract., but following are the main principles of fi...

DIFFERENCE BETWEEN DOUBLE INSURANCE AND REINSURANCE

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 The concept  of
double insurance differs from the concept of reinsurance the following
respects:.  (a) MEANING:  The reinsurance business is entered into by the original
insurer  with the order insurers.  But in double insurance, but the insured gets
the same subject  matter insured  with more than one insurer or under more than
one policy  with the same insurer.  (b).: FILLING 
CLAIM:  In reinsurance , the
insured cannot be claim any part of the his loss from the insurer.  But in the double insurance the  insured can claims only his  actual loss from  each of the insurers  up to the amount insured with them.  ( C) . CONTRIBUTION:  In reinsurance , the reinsured will claim a
part of the loss proportionate to the risk reinsured by the him with the
reinsurers  . But in double insurance,  each 
insurer is liable to contributions 
on pro-rata basis towards the loss suffered by the insured.  (13). 
UNDER INSURANCE:  When an
insurance is taken by the for less than the actual value of the subject  matter under one or more policies  it amounts 
to under insurance. This practice is deliberately  followed to avoid  the payments 
of fair premium. By inserting an average clauses in the policy the under
insurance is a penalized  in such a way
that the actual  loss is payable in
proportion to the policy value of the subject matter:  The claim payable under average clauses is
calculated as given below:  </div>
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(14).  ASSURANCE AND INSURANCE:  Both the these two terms are used
synonymously in the context while the term insurance is a used in other types
if insurance  like fire or marine.  Assurance refers to a contract in which  the sum assured is bound to be payable  sooner of later. But a contract of insurance
is a contract  for compensation  of damage or loss and the question of claim
does not arise in the cases there is no loss. Thus the term insurance is used
when the risk is undertaken  and I  such cases the policy  does not become a claim. But in case of  assurance, the policy is bound to become a
claim in the stipulated  manner e.
g.  the insured may die in the course of
the term of the policy or else  he is
bound to attain a particular age. In common usage, the terms are very widely
used to mean one and the same thing.<br />
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DIFFERENCE BETWEEN INSURANCE AND WAGERING
AGREEMENTS=Insurance contracts are not wagering  or gambling 
contracts, such as a betting on the turn 
of a  card or on horse  racing etc., In a wagering  contract, both parties, create a risk and
want to make money the happening  or
otherwise of an event, while in the case of insurance, risk already exists and
the purpose of contract is only the transfer 
the risk, . Though  there is
a  uncertainty and payments  is made on the happening  of the event in both the cases. , really is
it not so. the following are the differences between these two contracts.  (1). PURPOSE: 
The object of insurance is to protect the insured against loses on the
happening  of some uncertain future
events. the object  of a wager is a to
make profit by winning.  (2). RISK:.
Insurance is meant  for protection , if
the risk, which is already  there,
materializes, . But the risk is oriented in wagering  contracts.<br />
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INSURABLE INTEREST:  The
existence  of insurable interest is
necessary  in a contract of insurance as
against a  wagering contract, where
neither party has any pecuniary  interest
a except  that a created by the contract
itself.  (4).  UTMOST GAITH FAITH:  In an insurance contract the observance of
good faith is a essential but good faith need not be observed in  a wagering 
contract.  (5).
CONSIDERATION:  There is a no
consideration  in a wagering contract
whereas in case of insurance, the presents of consideration is a must.  (6). 
PUBLIC INTEREST: insurance contract are in a public interest and are a
encouraged by the government  but
wagering contract  are against public
interest.  (7)ENFORCEABLE:  insurance contract  are valid and legally  enforceable 
but wagering  agreements are void
and are a not legally enforceable.   (8).  HAPPENING OF EVENT: An event (except death),
against the risk of which the insurance is taken by the may or may not take
place at all. The wagering  event is bound
to happen.  (9). INDEMNITY : The
principles of indemnity  applied  to all insurance contract except  those of the personal insurance. No such
principle applies to a  wagering
contract.  (10).  AMOUNT: 
The wagering amount is paid immediately 
on the occurrence of the event . Only if there is a loss owing a to the
occurrence of the event the money  will
be paid subject to a maximum  limit
specified in insurance contract.</div>
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DIFFERENCE BETWEEN DOUBLE INSURANCE AND REINSURANCE

The concept of double insurance differs from the concept of reinsurance the following respects:. (a) MEANING: The reinsurance business...

ADVANTAGE OF REINSURANCE

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 The advantage  of
reinsurance can be summarized  as given
below; (1). SPREADS THE RISKS: Reinsurance 
makes the best possible 
distributions of risk among the various insurers.  Concentrations  of larger risks on a particular insurer makes
it is a very hard to unction smoothly 
efficiently  and profitably  Reinsurance 
contributes a lot in the this respect by making best distributions of
risk among many insurers.:  (2). LIMITS
THE LIABILITY : Reinsurance helps is in limiting  the liability of the insurers  to the maximum amount.<br />
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 (3). PROTECTS THE INSURANCE FUNDS: It
protects the insurance funds to of the original insurer and gives additional
security  to the policy holder and a
insuring community. (4). INCREASES 
INSURER’S  GOODWILL: The financial
and risk bearing capacity of the insurer 
increases  with the help of the
reinsurance and with the existence  of
reinsurance facilities  an insurer a\can
accept risk beyond his capacities. This enhances  the goodwill 
of the insurer.  (5). CURBS
COMPETITION AND RIVALRIES: reinsurance reduce inter company business
competitions  as no one works
independent  but in co-operative manner
and the with helping  mind in the area of
the insurance business, thus reinsurance helps in curbing  competitions rivalries in the similar  line of the insurance business.  (6). BRINGS STABILITY:  Reinsurance facilities in bringing stability  in the insurance market. These
facilities  also bring stability  in the value of the shares os such  companies 
on the stock exchange.  (7).
REDUCE PROFIT FLUCTUATIONS:  The
reinsurance schemes reduce to a considerations 
extent the violent  fluctuations
in the profits of the companies . If no 
the other hand, heavy  risks are
retained by the original insurer, in the his profits  are greatly upset due to a heavy  single loss.</div>
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 (8). INCREASES INSURANCE
BUSINESS:  Reinsurance enables every
insurer to accept or underwrite insurance 
business as the total risk will be distributed  among the other reinsurers. Thus,  reinsurance helps  increasing the volume of insurance business,
In its absence, every  insurer will
hesitate to accept huge risks and it would 
be very difficult  for an insurer,
in case the he accept  risk exceeding hi
capacity.  (9). MINIMUM DEALINGS:  Due to the reinsurance schemes  the insured is required  to indulge to 
in the minimum dealings  with only
one insurer . Without reinsurance facility 
, the insurer would have to contact several insurers to enter into
various  individual insurance agreement
on the same property. This involves considerable cost, loss of the
precious  time and slow down the pace of
the protection cover.  (10). PREVENTS
RATE CUTTING: Finally the reinsurance prevent the rate cutting and acceptance
of undesirable risks to a great extent. This is obviously because the actions
of the ceding office are always  subject
to audit and scrutiny  and through
examinations  by the guaranteeing
offer  office for its satisfaction. This
leads to checks  various unhealthy  and undesirable  practice 
and promoters  a healthy spirit of
competition among the insurers.<br />
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METHODS
OF REINSURANCE:  There are two important
of effecting reinsurance cover: 1. Facultative 
Reinsurance:. 2. Treaty Reinsurance. 
1. FACULTATIVE REINSURANCE: It is also known  as specific reinsurance, . Under this method
each risk is offered for reinsurance by the ceding  company and may be accepted or declined at
will be may  the insurer. The procedure  is to submit brief details if the risk to
reach  each reinsurer who will indicate
the proportion that he would accept. When the ceding  company issues the policy, closing
particulars I.e.  a copy of the policy
etc., is sent  to the reinsurer who will
then issue the reinsurance policy. The reinsurance are not obliged to accept
the risk. That is they have the decide. options of facility to reject or
accept  the reinsurance any  amount they decide,. Hence the term
facultative reinsurance., In case of the risk is not  fully accepted the ceding  company may again have to the approach
another insurer for the balance. For example 
a proposal  for Rs. 60 crores come
with the ceding company. The retention 
of the ceding company is 25 crores and for the balance of Rs. 35
crores  he approaches insurer A who  accepts for only Rs. 20 crores. The
ceding  company may again  have to approach insurer B for the balance of
the Rs. 15 cores., Any alterations  in
the terms and conditions The reinsurance are not obliged to accept the risk.
That is they have the decide. options of facility to reject or accept  the reinsurance any  amount they decide,. Hence the term
facultative reinsurance., In case of the risk is not  fully accepted the ceding  company may again have to the approach
another insurer for the balance. For example 
a proposal  for Rs. 60 crores come
with the ceding company. The retention 
of the ceding company is 25 crores and for the balance of  he approaches insurer A who  accepts for only Rs. 20 crores. The
ceding  company may again  have to approach insurer B for the balance of
the Rs. 15 cores., Any alterations  in
the terms and conditions made by the ceding company  are to be informed to reinsurance or
reinsurers  also. This method  is considered 
to be the easiest  method of
reinsurance at each time the ceding company has to make the  a fresh proposal  to the reinsurer and the insurer accepts the
risks after fully examining the individual 
risk, . In the event of the loss, the ceding company is compensated  in proportion 
to the amount of the risk underwritten by each  reinsurers.<br />
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 2. TREATY REINSURANCE:  Under this
method a treaty agreement between the ceding company and various reinsurance is
made  for a fixed period, usually a year.
Accordingly  the ceding  company agrees to provide a certain amount of
business to the reinsurers  for
reinsurance and the reinsurers agree to the accept  all reinsurance business of the  a definite type within the limits laid
down  in the agreement . Whenever the
ceding company accepts the risk  of the
original insured. , he has to retain a pre-determined proportions  of the total risk so accepted and so has to
reinsure the remaining  risk with other
reinsurers., He has to pay the  premiums
to other re insurers  for accepting  the risk. This method, in fact  provides 
an automatics  protections to the
ceding  the  company as the   under the treaty the reinsurer has to
the  accept . This method in fact
provides  an automatic protection to the
ceding company as under this policy the treaty the reinsurer has to the accept
the risk coming with in the  scope of
treaty . </div>
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That it is the why this methods  is called it is a  “Treaty 
reinsurance or Automatic Reinsurance Methods”   TREATY reinsurance is practically applied in
four ways, namely (a). Quota share treaty : (b). Surplus treaty: ( C ) ,. Excess of loss treaty : and the ( D ). Stop loss of
excess of the loss ratio treaty.</div>
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ADVANTAGE OF REINSURANCE

The advantage of reinsurance can be summarized as given below; (1). SPREADS THE RISKS: Reinsurance makes the best possible distributi...