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
.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.,,
(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.
(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.
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.