Insurance Services Video Lecture | Business Studies (BST) Class 11 - Commerce

insurance life is unpredictable
eventualities can occur it is very
difficult to predict them beforehand
eventualities may be in a simple form of
being stranded on a highway or running
short of cash in a foreign country it
may also mean loss in business terms due
to fire in a godown or sinking of cargo
in a vessel in mid seas it can be much
more complicated at times it can mean
encountering a natural calamity like an
earthquake or a tornado which may result
in loss in property or life or both
whatever be the reason one thing is sure
recovering from the loss takes time
recouping from the same is never
immediate
there is help in such a situation and
that is what insurance is all about well
it does not mean we are protected from
the eventualities but it does mean that
insurance provides the strength to the
user to face this situation boldly to a
certain extent take for example the case
of mr. a and mr. B both of them residing
in the same society when 26-7 struck
Mumbai City
well mr. a had ensured his house for
loss due to floods for an amount of one
lakh rupees whereas mr. B had no
insurance for his house no doubt both of
them would have to go through the ordeal
of torrential rains to the same extent
but after the event is over mr. a would
be in a better position than mr. B the
reason is simple to guess where as it is
the insurance firm that will repay the
extent of actual loss to mr. a to a
maximum cover of 1 lakh rupees mr. B has
to bear the entire loss himself but
insurance cover does not come free there
is a price tag to it which is known as
premium premium is a small amount and
insurance company charges for the
coverage it offers it is non-refundable
thus in case of non occurrence of the
event the premium is not refunded for
example insurance companies may charge a
premium of 600 rupees for insuring a
property against theft floods fire for a
cover of 1 lakh rupees the premium may
vary from company to company it also
depends on the location of the property
how can an insurance company survive in
business if it needs to pay an amount of
one lakh rupees for just six hundred
rupees premium or in a more generic term
how can such a small premium take care
of a much larger sum assured just like
mr. a in our case there are thousands of
people who opt for an insurance cover
each one of them paying a premium just
to keep the policy alive these premiums
accumulate to form a large fund to
corporate such eventualities which may
affect only a few policyholders in case
the stakes are very high the insurance
company may insure itself by purchasing
insurance from a reinsurer insurance can
be of two types
life insurance and general insurance
life insurance covers the life of a
person it is different from all other
types of insurance cover it shall be
dealt with in depth later on
general insurance insurance other than
life insurance falls under the category
of general insurance a few of them are
listed for understanding marine
insurance and fire insurance need a
special mention here marine insurance
marine insurance provides protection
against loss by marine pedals or perils
of the sea marine perils are collision
of a ship with a rock or a ship attacked
by enemies or captured by pirates to
name a few these perils cause damage
destruction or disappearance of the ship
and cargo and non-payment of freight
it is a device wherein the insurer
undertakes to compensate the owner of a
ship or cargo for complete or partial
loss at sea the insurer guarantees to
make good the losses due to damage to
the ship or cargo arising out of the
risks incidental to sea voyages the
insurer in this case is known as the
underwriter and a certain sum of money
is paid by the insured in consideration
for the guarantee or protection he gets
marine insurance is slightly different
from other types there are three things
involved that is ship or hull cargo or
goods and freight a ship or hull
insurance the insurance policy is for
indemnifying the insured for the losses
caused by damage to the ship B cargo
insurance the cargo while being
transported by ship is subject to many
risks these may be a port that is risk
of theft lost goods or on voyage etc
thus an insurance policy can be sure to
cover against such risks to cargo sea
freight insurance if the cargo does not
reach the destination due to damage or
loss in transit the shipping company is
not paid freight charges Freight
insurance is for reimbursing the loss of
freight to the shipping company that is
the insured
fire insurance fire insurance is a
contract whereby the insurer in
consideration of the premium paid and it
takes to make good any loss or damage
caused by fire during a specified period
up to the amount specified in the policy
the risk covered by a fire insurance
contract is the loss resulting from fire
or some other cause and which is the
proximate cause of the loss if
overheating without ignition causes
damage it will not be regarded as a fire
loss within the meaning of fire
insurance and the loss will not be
recoverable from the insurer the
differences between life Fire & Marine
insurance are as shown basic functions
of insurance
the functions of insurance can be
broadly bifurcated as one primary
functions two secondary functions three
other functions primary functions of
insurance providing protection the most
important function of insurance is to
provide security against future rise
accidents and uncertainty this does not
mean that the eventualities can never
occur all it means is in the case of an
eventuality the policyholder is in a
better position to face it this is
because it provides cover against
economic loss by apportioning the risk
with others collective risk bearing
insurance is an instrument to share the
financial loss it is a medium through
which few losses are divided among a
large number of people premium received
from all the insured is pulled together
and out of that fund the persons facing
a specific risk are paid evaluating risk
insurance fixes the likely volume of
risk by assessing diverse factors that
give rise to risk risk is the basis of
ascertaining the premium rate as well
provide certainty insurance is a device
which assists in changing uncertainty to
certainty
basic functions of insurance secondary
functions of insurance the secondary
function of insurance is to reduce loss
by sending surveyors and Assessors on a
premises to make assessments and
recommendations this is achieved by
warning individuals and business men to
embrace appropriate devices like
observing safety instructions
installation of automatic sparkler or
alarm systems are the functions of
insurance acts as a saving investment
scheme insurance is in fact a savings
option by itself
it saves unwanted expenditure by
arranging money flow it provides
benefits from income tax exemptions in
short it manages the monetary structure
of an individual economically a device
of procuring foreign exchange being a
part of international commerce and
business almost any nation or country
can procure foreign exchange this can be
carried on through marine insurance
policies and many other ways risk free
trade various kinds of insurance
policies help in making foreign trade
risk free
principles of insurance the principles
of insurance are the rules of action or
conduct adopted by the stakeholders
involved in the insurance business they
are as under a insurable interest
insurable interest means that the person
opting for insurance must have pecuniary
interest in the property he is going to
get insured and will suffer financial
loss on the occurrence of the insured
event this is one of the essential
requirements of any insurance contract
therefore a person can go for insurance
of only those properties where he stands
to benefit by the safety of the property
in case of any eventuality the insured
will suffer loss damage or injury thus
if you want to insure the Taj Mahal or
the Red Fort you will not be allowed to
do so as you do not have any pecuniary
interest in these properties
be principle of utmost good faith you
behemoth Edie's an insurance contract is
a contract of you Barry Murphy DS it
must be based on good faith it is the
duty of the insured to voluntarily make
full accurate disclosure of all facts
which are material to the risk being
proposed similarly it is necessary for
the insurer to make clear all the terms
and conditions in the insurance contract
if the insurance contract is obtained by
way of fraud or misrepresentation it is
boiled
thus in case of life insurance the
proposer must disclose the true age and
details of the existing illnesses or
diseases similarly in case of insurance
of a building against fire the proposer
must disclose the details of goods
stored
if such goods are of hazardous nature
see principle of indemnity the insurance
contract should always be a contract of
indemnity only and nothing more
according to this principle the
insurance contract should be such that
in case of loss due to the eventualities
mentioned in the contract the insured
should be neither better off nor worse
off after receiving the insured amount
the main object of this principle is to
ensure that the insured is not able to
use this contract for speculation or
gambling insurance is a federal subject
in India this sector has gone through a
number of phases and changes in 1999 the
government opened up the insurance
sector to private companies it also
allowed foreign direct investment in
this sector up to 26 percent since then
it has become a booming market by itself
well do we need to argue over the
benefits of insurance insurance covers
large expenses caused by things which
are out of our control
but when they occur they amount to huge
expenses which can wash away hard-earned
income insurance is a wise choice it
means you are being prudent with your
money as well as your property
as there are many players in the market
it is necessary to choose a company of
good repute it is also necessary to read
the policy document carefully compare
policies of different companies before
finalizing on any of course it does not
mean that you are totally safe and
eventualities would never occur but it
will surely help you recover easily if
they do