فحص فيروس كورونا
Monday, April 6, 2020
Thursday, March 2, 2017
Friday, April 15, 2016
What are the 2 main types of Insurance ?
Insurance is a form of contract or agreement under which one party agrees in return of a consideration to pay an agreed amount of money to another party to make good for a loss, damage, injury to something of value in which the insured has a pecuniary interest as a result of some uncertain event. This agreement or contract when put in writing is known as a policy. The person whose risk is covered is called insured or assured and the company or corporation which insures is known as insurer, assurer or underwriter. The consideration in return for which the insurer agrees lo make good the loss is known us premium.
image source: janasays.com/wp-content/uploads/2013/06/bigstock-Insurance-7091014.jpg
2 Types of Insurance
From accounting point of view, insurance may be divided into two types, i.e..
- Life Insurance. Life insurance business is carried on by Life Insurance Corporation of India since 1956 Under this type of insurance the corporation guarantees lo pay a certain sum of money to the policyholder on reaching a certain age or on his death whichever is earlier. Life insurance has an clement both of protection and investment.
- General insurance. It includes all other types of insurance except life insurance as fire insurance, marine insurance, accident insurance, burglary, fidelity, third party, workmen compensation, consequential loss etc. Under this type of insurance the insurer undertakes 10 indemnify the loss suffered by the insured on happening of a certain event in consideration for a fixed premium.
What are the features of Double Insurance?
The features of Double Insurance?
Double insurance denotes insurance of same subject matter with two different companies or with the same company under two different policies. Double insurance is possible in case of indemnity contract like fire, marine and property insurance. Double insurance policy is adopted where the financial position of the insurer is doubtful.
The following are some of the broad features of double insurance:
- Insurance on the subject matter is effected with two or more insurance companies.
- A person may get two or more policies and can claim the amount of all these policies.
- In case of life insurance, more than one policy can be effected and the amount of all these policies can be claimed on all these policies at the time of death.
- The insured cannot recover more than the actual loss.
Purpose and Need of Insurance
Purpose and Need of Insurance
The business of insurance is related to the protection of the economic value of assets. Every asset has value. The asset would have been created through the efforts of the owner, in the expectation that, either through the income generated there from or some other output, some of his needs would be met. In the case of a factory or a cow, the production is sold and income generated. In the case of a motorcar, it provides comfort and convenience in transportation. There is no direct income. There is normally expected life time for the asset during which time it is expected to perform. The owner, aware of this, can so manage his affairs that by the end of that life time, a substitute is made available to ensure that the value or income is not lost. However, if the assert gets lost earlier, being destroyed or made non functional, through an accident or other unfortunate event, the owner and those deriving benefits there from suffer. Insurance is mechanism that helps to reduce such adverse consequences.
Assets are insured, because they are likely to be destroyed or made non-functional through an accidental occurrence. Such possible occurrences are called perils. Fire, floods, breakdowns, lightning, earthquakes, etc, are perils. The damage that these perils may cause the asset, is the risk.
The risk only means that there is possibility of loss or damage. It may or may not happen. There has to be uncertainity about the risk. Insurance is done against the contingency that it may happen. Insurance is relevant only if there are uncertainties. If there is no uncertainty about the occurrence of an event, it cannot be insured against.
There are other meanings of the term ‘risk’. To the ordinary man in the street risk means exposure to danger. In insurance practice risk is also used to refer to the peril or loss producing event. For example, it is said that fire insurance covers the risks of fire, explosion, cyclone, flood etc. again, it is used to refer to the property covered by insurance. For example, a timber construction is considered to be a bad risk for fire insurance purpose. Here the term risk refers to the subject matter of insurance.
Conceptually the mechanism of insurance is very simple. People who are exposed to the same risks come together and agree that, if any one of the members suffers a loss, the others will share the loss and make good to the person who lost. All people who send goods by ship are exposed to the same risk related to water damage, ship sinking, piracy, etc. those owning factories are not exposed to these risks, but they are exposed to different kinds of risks like, fire, hailstorms, earthquakes, lightening, burglary, etc. like this, different kinds of risks can be identified and separate groups, made including those exposed to such risks. By this method, the risk is spread among the community and the likely big impact on one is reduced to smaller manageable impacts on all.
The manner in which the loss is to be shared can be determined before hand. It may be proportional to the likely loss that each person is likely to suffer, which is indicative of the benefit he would receive if the peril befell him. The share could be collected from the members after the loss has occurred or the likely shares may be collected in advance, at the time of admission to the group. Insurance companies collect in advance and create a fund from which the losses are paid.
A human life is also an income generating asset. This asset also can be lost through unexpectedly early death or made non-functional through sickness and disabilities caused by accidents. Accidents may or may not happen. Death will happen, but the timing is uncertain. If it happens around the time of one’s retirement, when it could be expected that the income will normally cease, the person concerned could have made some other arrangements to meet the continuing needs. But if it happens much earlier when the alternate arrangements are not in place, insurance is necessary to help those dependent on the income.
In the case of a human being, he may have made arrangements for his needs after his retirement. Those would have been made on the basis of some expectations like he may live for another 15 years, or that his children will look after him. If any, of these expectations do not become true, the original arrangement would become inadequate and there could be difficulties. Living too long can be as much a problem as dying too young. These are risks which need to be safeguarded against. Insurance takes care.
Insurance does not protect the asset. It does not prevent it loss due to the peril. The peril cannot be avoided through insurance. The peril can sometimes be avoided through better safety and damage control management. Insurance only tries to reduce the impact of the risk on the owner of the asset and those who depend on that asset. It compensates, may not be fully, the losses. Only economic or financial losses can be compensated.
The concept of insurance has been extended beyond the coverage of tangible assets. Exporters run the risk of the importers in the other country defaulting as well as losses due to sudden changes in currency exchange rates, economic policies or political disturbances. These risks are now insured. Doctors run the risk of being charged with negligence and subsequent liability for damages. The amounts in question can be fairly large, beyond the capacity of individuals to bear. These are insured. Thus, insurance is extended to intangibles. In some countries, the voice of a singer or the legs of a dancer may be insured; even through the advantages of spread may not be available in these cases.
Satisfaction of economic needs requires generation of income from some source. If the property, which is the source of such income, is lost fully or partially, permanently or temporarily, the income too would stop. The purpose of insurance is to safeguard against such misfortunes by making good the losses of the unfortunate few, through the help of the fortunate many, who were exposed to the same risk but saved from the misfortune. Thus the essence of insurance is to share losses and substitute certainty by uncertainty
.
There are certain basic principles which make it possible for insurance to remain popular and a fair arrangement. The first is the fact that people are exposed to risks and that the consequences of such risks are difficult for anyone individuals to bear. It becomes bearable when the community shares the burden. The second is that no one person should be in a position to make the risk happen. In other words, none in the group should set fire to his assets and ask others to share the costs of damage. This would be taking unfair advantage of as arrangement put into place to protect people from the risks they are exposed to. The occurrence has to be random, accidental and not the deliberate creation of the insured person.
Assets are insured, because they are likely to be destroyed or made non-functional through an accidental occurrence. Such possible occurrences are called perils. Fire, floods, breakdowns, lightning, earthquakes, etc, are perils. The damage that these perils may cause the asset, is the risk.
The risk only means that there is possibility of loss or damage. It may or may not happen. There has to be uncertainity about the risk. Insurance is done against the contingency that it may happen. Insurance is relevant only if there are uncertainties. If there is no uncertainty about the occurrence of an event, it cannot be insured against.
There are other meanings of the term ‘risk’. To the ordinary man in the street risk means exposure to danger. In insurance practice risk is also used to refer to the peril or loss producing event. For example, it is said that fire insurance covers the risks of fire, explosion, cyclone, flood etc. again, it is used to refer to the property covered by insurance. For example, a timber construction is considered to be a bad risk for fire insurance purpose. Here the term risk refers to the subject matter of insurance.
Conceptually the mechanism of insurance is very simple. People who are exposed to the same risks come together and agree that, if any one of the members suffers a loss, the others will share the loss and make good to the person who lost. All people who send goods by ship are exposed to the same risk related to water damage, ship sinking, piracy, etc. those owning factories are not exposed to these risks, but they are exposed to different kinds of risks like, fire, hailstorms, earthquakes, lightening, burglary, etc. like this, different kinds of risks can be identified and separate groups, made including those exposed to such risks. By this method, the risk is spread among the community and the likely big impact on one is reduced to smaller manageable impacts on all.
The manner in which the loss is to be shared can be determined before hand. It may be proportional to the likely loss that each person is likely to suffer, which is indicative of the benefit he would receive if the peril befell him. The share could be collected from the members after the loss has occurred or the likely shares may be collected in advance, at the time of admission to the group. Insurance companies collect in advance and create a fund from which the losses are paid.
A human life is also an income generating asset. This asset also can be lost through unexpectedly early death or made non-functional through sickness and disabilities caused by accidents. Accidents may or may not happen. Death will happen, but the timing is uncertain. If it happens around the time of one’s retirement, when it could be expected that the income will normally cease, the person concerned could have made some other arrangements to meet the continuing needs. But if it happens much earlier when the alternate arrangements are not in place, insurance is necessary to help those dependent on the income.
In the case of a human being, he may have made arrangements for his needs after his retirement. Those would have been made on the basis of some expectations like he may live for another 15 years, or that his children will look after him. If any, of these expectations do not become true, the original arrangement would become inadequate and there could be difficulties. Living too long can be as much a problem as dying too young. These are risks which need to be safeguarded against. Insurance takes care.
Insurance does not protect the asset. It does not prevent it loss due to the peril. The peril cannot be avoided through insurance. The peril can sometimes be avoided through better safety and damage control management. Insurance only tries to reduce the impact of the risk on the owner of the asset and those who depend on that asset. It compensates, may not be fully, the losses. Only economic or financial losses can be compensated.
The concept of insurance has been extended beyond the coverage of tangible assets. Exporters run the risk of the importers in the other country defaulting as well as losses due to sudden changes in currency exchange rates, economic policies or political disturbances. These risks are now insured. Doctors run the risk of being charged with negligence and subsequent liability for damages. The amounts in question can be fairly large, beyond the capacity of individuals to bear. These are insured. Thus, insurance is extended to intangibles. In some countries, the voice of a singer or the legs of a dancer may be insured; even through the advantages of spread may not be available in these cases.
Satisfaction of economic needs requires generation of income from some source. If the property, which is the source of such income, is lost fully or partially, permanently or temporarily, the income too would stop. The purpose of insurance is to safeguard against such misfortunes by making good the losses of the unfortunate few, through the help of the fortunate many, who were exposed to the same risk but saved from the misfortune. Thus the essence of insurance is to share losses and substitute certainty by uncertainty
.
There are certain basic principles which make it possible for insurance to remain popular and a fair arrangement. The first is the fact that people are exposed to risks and that the consequences of such risks are difficult for anyone individuals to bear. It becomes bearable when the community shares the burden. The second is that no one person should be in a position to make the risk happen. In other words, none in the group should set fire to his assets and ask others to share the costs of damage. This would be taking unfair advantage of as arrangement put into place to protect people from the risks they are exposed to. The occurrence has to be random, accidental and not the deliberate creation of the insured person.
Introduction to Insurance and its purpose and needs
Insurance is a mechanism that helps to reduce the effects of adverse situations in the economical way. It promises to pay to the owner or beneficiary of the asset, a certain sum if the loss occurs.
Image Source: insureandfinanceme.com/wp-content/uploads/2015/02/Fotolia_60135357_Subscription_Monthly_M.jpg
What Is Insurance ?
The business of insurance is related to the protection of the economic values of assets. The asset would have been created through the efforts of the owner. The asset is valuable to the owner, because he expects to get some benefits from it because it meets some of his needs. This benefit may be an income or in some other form.
In the case of a factory or a cow, the product generated by it is sold and income is generated. In the case of a motor car, it provides comfort and convenience in transportation, there is no direct income. Both are assets and provide benefits.
Every asset is expected to last for a certain period of time during which it will provide the benefits, after that, the benefit may not be available. There is a life-time for a machine in a factory or a cow or a motor car. None of them will last for ever. The owner is aware of this and he can so manage his affairs that by the end of that period or life-time, a substitute is made available. Thus, he makes sure that the benefit is not lost. However, the asset may get lost earlier. An accident or some other unfortunate event may destroy it or make it incapable of giving the benefits. An epidemic may kill the cow suddenly. In that case, the owner and those enjoying the benefits therefrom, would be deprived of the benefits. The planned substitute would not have been ready. There is an adverse or unpleasant situation. Here, insurance helps to reduce the effects of such adverse situations.
Purpose & Need Of Insurance
Purpose & Need Of Insurance
The risk only means that there is a possibility of loss or damage. The damage may or may not happen. Insurance is done against the possibility that the damage may happen. There has to be an uncertainty about the risk. The earthquake may occur, but the building may not have been affected at all. The word ‘possibility’ implies uncertainty. Insurance is relevant only if there are uncertainties.
In case of a human being, death is certain, but it’s time is uncertain. The person is insured, because of the uncertainty about the time of his death. In the case of a person who is ill,the time of death is not uncertain, though not exactly known. It would be ‘soon’. He can’t be insured.
How Insurance Works
The mechanism of insurance is very simple. People who are exposed to the same risks come together and agree that, if any one of them suffers a loss, the others will share the loss and make good to the person who lost. The manner in which the loss is to be shared can be determined beforehand. It can be equal among all. It can also be proportional to the risk that each person is exposed to.
Types of Insurance
Types of Insurance
What is property & casualty insurance?
Property and casualty (P&C) or general insurance involves all types of insurance other than life and health insurance. It includes:
Automobile insurance
Automobile insurance premiums represent more than fifty percent (50%) of all property and casualty premiums in Canada.
All vehicles by law have to be insured for third party liability at a minimum. Most drivers also insure themselves against damage to their vehicle or loss to theft or fire. In B.C., Saskatchewan and Manitoba automobile insurance is government owned and administered through broker agencies. Private automotive insurance companies operate in the balance of Canada.
Property insurance
Personal and business properties represent the second largest source of premiums to insurers.
Home owners with mortgages are legally required to insure their property against loss or injury to others. Most owners also protect their belongings, both in and out of the house, with additional contents insurance.
Personal property insurance refers to insurance policies provided for property having a personal or non-business use. Types of personal property policies includes:
- Tenant’s insurance;
- Homeowner’s insurance;
- Mobile home insurance;
- Condominium unit owner insurance;
- Secondary dwelling insurance;
- Seasonal dwelling insurance.
Business Insurance
Commercial property insurance refers to insurance policies provided for property having a business use. In addition to providing coverage for loss, damage and liability issues, on both the premises and contents, business owners buy protection for the indirect loss of business costs associated with having to suspend operations while recovering from an incident.
Liability insurance
Liability insurance provides protection when the policy holder is financially responsible for injury or damage they cause to others. Premiums from liability insurance represent the third major source of income to insurers.WATCHOUR VIDEOS
Play
What is insurance and why is it important?
Purpose of Insurance
What is insurance and why is it important?
The major function of P&C insurance... is simply to restore your property and possessions or business to the point it was before the insurable incident occurred, to re-establish normalcy in your life. The economic structure of the insurance industry is built around a system in which the cost of the losses of the few is shared among the many. Insurance can be viewed as a large pot into which all premiums are placed. The pot has to provide for payment of the losses of those who have claims, the cost of running the business, plus a reasonable profit for the provider.
Insurance is all about managing risk and providing financial compensation in the event of a loss. Generally, the risks people face fall into the following categories:
Personal risk
People are their own greatest asset. Financial loss will almost always accompany the loss of one’s health or life.
People are their own greatest asset. Financial loss will almost always accompany the loss of one’s health or life.
Property risk
People will incur a financial loss when owned property is destroyed or damaged.
People will incur a financial loss when owned property is destroyed or damaged.
Liability risk
When people’s action result in injury or damage to others, the law generally provides that they be held financially responsible.
When people’s action result in injury or damage to others, the law generally provides that they be held financially responsible.
In Canada, an insurance policy can be purchased directly from a company, from an insurance agent of a company, or from an insurance broker who advises you on your appropriate coverage and shops on your behalf among a choice of recommended providers.
Subscribe to:
Comments (Atom)