What is life Insurance? Discuss the features of Life Insurance and General Insurance.
Ans:- Meaning of Life Insurance – Life insurance is a contract in which an insurance company in consideration of a premium undertakes to pay a certain sum of money either on the death of the policyholder to his/her nominees or on the expiry of a fixed period to him/her.
In other words it protects the loss out of the death of the policyholder.
Features of Life Insurance
There are some features which specify the services of life insurance. These are the following features.
- Offer and Acceptance
- Insurance Interest
- Financial Services
- Types of Contract
- Maturity Value
- Payment of premium
- Financial Protection
- Habit of Saving
- Surrender Values
- Meets various needs
1.Offer and Acceptance:- Like other contracts, a life insurance contract is also the outcome of an offer made by the policyholder and its acceptance by the insurance company. In order to create a valid insurance contract, there is a lawful offer by an applicant and lawful acceptance of the same by the insurer.
2. Insurance Interest:- In the contract of life insurance insurable interest must be involved in the policy of insurance. As example
-A person has an unlimited insurable interest in his own life.
-A husband in the life of his wife.
-A wife in the life of her husband.
-And an agent in the life of his principal etc.
3. Financial Service:- This life of insurance contract provides financial help to the nominees of policyholders or to policyholders. Insurance companies do not sell physical products like shoes and clothes. It is only a financial service.
4. Types of contract:- The contract of life insurance is not just a contract for indemnity as financial loss caused by a death cannot be calculated in monetary value. It is only a financial protection is granted to the policyholder if he survives upto the date of maturity of policy or to his claimant if policyholder dies before the maturity of policy.
5. Maturity Values:- In this contract insurance companies agree to pay a certain amount either on the death of the insured person or on the maturity of the policy, whichever is earlier. So in life insurance payment is a must.
6. Payment of Premium:- In life insurance the insured person is under an obligation to pay periodically the amount of payment till the death of insured or expiry of the period of policy, whichever is earlier.
7. Financial Protection:- It gives a lot of financial protection. As per requirements of society various policies are available here for policyholders.
8. Habit Of Savings:- under thr life insurance contract, the insured person has to face some definite premium compulsory. At initial stage it seems to be force saving but later on it becomes the habit of the insured person. It cuts the unnecessary expense of the individuals and creates the habit of saving.
9. Surrender Value:- Generally Life insurance policy is for a longer period say for 15 or 20 years. If a policyholder is not in a position to pay the premium after a specific time period, he can get the surrender value of the policy after surrendering that.
10. Meets Various Needs:- A suitable insurance plan can meet the specific needs that are likely to arise in future, such as children’s education, medical needs, marriage provision, housing needs etc.
Meaning of General Insurance:- It is a non-life insurance.General insurance is an agreement between the insurance company and policyholder wherein the insurance company protects the valuable asset of the insured person from fire, theft and burglary.
Features of General Insurance
Like life insurance, General insurance also has some specific features. General insurance policies are different types so these all features are also different as per the policy contract. Which are described as follows.
- Fire Insurance Policy
- Marine Insurance Policy
- Motor Insurance Policy
- Home Insurance Policy
- Health Insurance Policy
1.Fire Insurance Policy:- Fire Insurance is a contract whereby the insurer company agrees to indemnify the insured person for the financial loss which may suffer due to destruction of property or goods, caused by fire, during the specified period.
Features of fire Insurance
- It provides the price of damage for the building.
- It provides the price for the electronic items, which are broken due to the fireplace, like television, computer, air coolers.
- It provides the price to employees, in case of loss of life due to the fireplace incident.
- It provides the medical expense for the employees, if they get injured due to the fireplace incident.
2. Marine Insurance Policy:- Marine insurance covers the loss to the ship or cargo during the water transportation. The loss can either be a complete loss or partial loss or damage.
Features of Marine Insurance
Under marine insurance provides a price to the owner of cargo if any loss occurred during the transport of goods from one location to another if the owner of cargo takes policy under marine contract.
- The Ship Owner can also claim his policy if any loss occurred due to transport of goods from one location to another.
- Fright insurance may also be claimant to the ship owner if the captain of the ship didn’t pay fright to the owner.
3. Motor Insurance:- Such type insurance is taken for a transport vehicle. If insurance is taken then a claim may be asked during the loss.
Features of Motor Insurance
- Such insurance provides protection against vehicle loss due to the incident.
- This insurance also involves passengers’ loss.
- Motor insurance involves repair of vehicles.
4. Home Insurance Policy:- Home insurance provides protection against home. If any loss occurs to home due to any nature or due to a long period. This may involve property which is held in the home.
Features of Home Insurance
- An amount is provided to the policyholder for his premium, causing a loss for those who took out a policy for home insurance.
- Home insurance may involve property insurance which is lying in the home.
- Any amount may be claimed for home renovation under the home insurance during the contract period.
5. Health Insurance Policy:- Health insurance policy provides protection against health. Which may involve any incident of life. Which may occur in the future. This insurance includes treatment of any ailment during the contract period.
Features of Health Insurance
- It provides a claim to employees whose health is insured by the employer.
- It provides expenses against treatment which are disclosed in the terms of the health insurance contract.
- It provides medical expenses to health insurance policyholders.
Conclusion :- Life insurance is concerned with the life of the policyholder and not for the general property of the individual. Whereas general insurance deals with the property of an individual but does not cover his life. So, with the help of features of life and general insurance we can understand thoroughly the system of insurance.
Don’t Miss following questions of insurance | Life insurance | life insurance
- Discuss the concept and meaning of insurance and its functions.
- Write a note on the importance of insurance for a developing country like India.
- What is a life insurance contract ? Explain its distinguishing characteristics.
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What is a life insurance contract ? Explain its distinguishing characteristics.