FIELDS OF INSURANCE
Insurance business is carried out in two fields:
i. Life assurance
ii. Property and accident insurance
Life assurance business is carried out by life assurance companies while the property and accident insurance is carried out by general insurance companies.
I. Life Assurance
Life assurance business relies on law of averages according to which, the insurance company works out the premium on the basis of the number of insured persons and their respective age. The greater the number or the lower the age of the insured the smaller will be the premium and vice versa. Life assurance is of the following types:
1. Life-Term Assurance
Under it, life is insured for a limited or definite period, say, 7 years, 10 year, 20 years, and son on. If the insured dies during the period insured the amount of the policy will be paid on his or her heir or heirs immediately and no premium will have to be paid anymore even if the insured dies right after paying the first premium. If he survives the whole period the policy will be terminated at the end of the specified period. The main advantage of this type of policy is its low premium.
2. Whole-life Assurance
The insured pays the premium throughout his life. The amount of premium varies with the age and the amount of the policy. If the person insured retires form the job he has to continue paying the premium till he survives.
3. Term Assurance
This type calls for insuring for a specified period of time during which the premium is to be paid. Policy will be paid only after the death of the insured, no matter he dies during or after the period of insurance. If he survives the period he will get nothing.
However, the premium is not to be paid after the death, or after the completion of the insured period.
4. Endowment Assurance
This is the commonest of all olher insurance policies. Its premium rate is the highest of those of life assurance and limited payment life assurance (term assurance). It is different from the limited payment life assurance in that the policy is paid either after death or after insurance period is complete. It can be bought with or without profit.
5. Personal Accident Insurance
Accidents cannot be prevented, but the loss arising out of them can be made up under this insurance scheme. The accident may cause death or partial or complete, temporary or permanent disablement. The amount is paid depending on the conditions covered in the policy.
II. Property Accident Insurance
It has the following kinds:
1. Fire insurance
Buildings are always at a risk of fire. They are used as houses, shops, mills, factories, warehouses. The possession may also be gutted to ashes. The insurance of this type of risk is carried out for one, three or five years. The greater the period the smaller will be the premium. The size of premium also depends upon amount of the policy, the condition and type of construction of the building. The premium on the fire proof building is quite small.
2. Casualty Insurance
Other risks, in addition to ones discussed above, include theft, health, compensation, travel, motor vehicle, which are covered under casualty insurance.
3. Marine Insurance/ Goods in Transit
Risks are always present during transit of goods. When they move from one place to another risk of accident, damage, fire, theft, or some other unforeseen incidents may take place. Marine insurance provides them the coverage of such risks. It is of two kinds:
i) Ocean marine insurance
This is concerned with high seas risks, and covers ships and goods on board. It is quite common in foreign trade.
ii) Inland marine insurance
It is resorted to when trade takes place within cities of a country by road, river, or sea.
4. Fidelity Insurance
Many insurance companies provide insurance coverage to credit transactions of business corporations. They provide guarantee about the credibility of companies with which the insured wants to establish business relations. In case the insured company suffers a loss, the insurance company makes the loss good.