Insurance is a promise by one person/ business to make compensation to other person/business against its financial losses as a result of a certain specific reason.

Terms in Insurance

  1. Insurer/Underwriter: One who provides insurance.
  2. Insured: One who gets insurance cover.
  3. Beneficiary: Is the person who will get payment against insurance claim from insurance.
  4. Assessor/Actuaries: Somebody employed by an insurance company to assess risks and fix premiums
  5. Sum Insured: Is amount which the insurer promises to pay at the maximum.
  6. Premium: Amount which is to be paid on order to buy an insurance cover. Once paid it is non-refundable. Premiums are to be paid on annual basis.
  7. Insurance Policy: Contract of Insurance.
  8. Cover Note: A document of transitional nature which acts a proof of insurance before insurance policy is issued.
  9. Claim form: Is a written document which has to be submitted by the beneficiary to the insurer to the payment against financial loss.
  10. Proposal form: Document on which written data about the insured is collected. On basis of this data premium are calculated.

Why insurance cover is obtained

  1. It gives confidence to the person/business.
  2. It can be obtained as a measure of saving for a certain future plan.
  3. As an investment
  4. It can give financial protection.
  5. Some times it is a obligation.

Types of Risks

1. Insurable Risks

Those risks against which probabilities of occurrence can be mathematically calculated on the basis of available past data for example theft, accident.

2. Non-Insurable Risks

Those risks against which probability of occurrence can not be mathematically determined for example failure in exam and change in fashion.

How Insurance Works

How Insurer makes Profit

How Insurance Company uses Premiums

  1. To make claim payments.
  2. Meet administrative expensive.
  3. To reinsure.
  4. To invest.

Factors effecting the Premium

1. Size of Poll Pool↑:Premium↓
2. Intensity of Risk Intensity of Risk↑: Premium ↑
3. No of Risks No of Risks ↑: Premium ↑
4. Sum Insured Sum Insured ↑: Premium ↑
5. Previous claim history Previous claim history ↑: Premium ↑

Principles and Doctrines of Insurance

1. Insurable Interest

2. Utmost Good Faith

3. Indemnity/Compensation

a. Contribution

b. Subrogation

Types of Insurance

a) General Insurance

a) Fire Insurance: Building due to fire.
b) Contents Insurance: Contents
c) Comprehensive Fire Insurance: Building, Contents, Riots, Floods and Earthquakes.
d) Consequential Loss Insurance: Loss of profit while rebuilding is going on.

b) Motor Insurance

a) Minimum Legal Cover: Injuries to third party on public roads only.
b) Third Party Cover: Includes injuries and damage to properties of third parties.
c) Third Party, fire and theft: Third Party plus, damage to car by theft or fire.
d) Comprehensive: As in C) plus damage to vehicle, personal injuries to driver and loss or damage of personal possessions while in car.

c) Accidental Insurance

a) Care Insurance: Theft, Accident and 3rd Party. b) Medical Policy Insurance:
c) Cash in Transit Insurance: Covers against loss due to robbery of cash in transit.
d) Workman compensation Insurance: Compulsory for employers to insure their employees against any accident during working hours.

d) Liability Insurance

a) Employer Liability: For accidents at work owing to employers negligence.
b) Public Liability: To cover claims made by the public as a result of damage to their property or life.
c) Professional Liabilities: Taken by lawyers, doctors, architects and engineers to cover against claims due to their personal negligence.
d) Insurance of Interest/ Fidelity bond: Guarantee by to cover embezzlement of employs.

e) Life Assurance

a) Whole Life policy: Lump sum payable at death.
b) Endowment policies: Agree sum payable at the end of a number of years on the maturity of the
policy, death which ever is sooner.
c) Family income protection policy: Paid on death of insured in series of regular payment.
d) Mortgage payment Insurance: On the death of legal mortgager, company pays.
e) Group Insurance: Taken by small employer for employees in place of pension scheme for employees

f) Marine Insurance

a) Ship and installation
b) Passengers
c) Crew
d) Port and installation
e) Cargo
f) Fright
g) Public Liability

g) Aviation Insurance

a) Planes
b) Crew
c) Passengers
d) Port Installation
e) Public Liability
f) Cargo

h) Nuclear Insurance

Evaluating Insurance Quotation Depends upon

  1. Amount of Premium.
  2. Risks covered.
  3. Claim payment history of insurer.
  4. Financial worth of insurer.
  5. Terms and conditions of insurance.

Middle Men in Insurance

  Brokers Agents
1. Independent entity. Works on behalf of insurer.
2. Job to bring the seller and buyer together. Job is to sell insurance policies on commission basis.
3. Provides risk management advice to the client. Does not provide advice.

Effecting an Insurance Policy

  1. Buyer will contact insurer for covering a certain risk.
  2. Insurer will appoint a surveyor.
  3. Surveyor will check the insured and get necessary information on the proposal form.
  4. On the basis of information collected on the proposal form, the insurer will calculate the premium.
  5. Buyer will pay the premium and will get the premium receipt and cover note from the insurer.
  6. After a few days insurance policy is issued.

Effecting Insurance Claim

  1. After the accident, Insured or beneficiary will contact insurer and the police department.
  2. Insurer will appoint a surveyor .
  3. Surveyor will contact the insured or beneficiary and give him/her a claim form.
  4. The insured/beneficiary will fill in the claim form and provide all relevant documentary evidence.
  5. If the surveyor and police department find out correctness of the claim, payment will be made to the beneficiary.