Insurance policies provide protection against the various types of uncertainties that can occur in the life of an individual. Having health insurance can help you cover up for the expenses paid for any diseases, while an accident insurance can help you in getting cover for any kind of accidents that may occur.
There are various types of insurance in the market due to the presence of a large number of insurance companies. But, the purview of this article is restricted to dealing with the types of Insurance as prescribed in the Business Studies syllabus for CBSE Class 11.
The types of Insurance that will be discussed are:
1. Life Insurance
2. General Insurance (which includes fire insurance, health insurance and marine insurance)
Let us discuss these types in detail.
1. Life Insurance:
Life insurance is a type of insurance policy in which the insurance company undertakes the task of insuring the life of the policyholder for a premium that is paid on a daily/monthly/quarterly/yearly basis.
Life Insurance policy is regarded as a protection against the uncertainties of life. It may be defined as a contract between the insurer and insured in which the insurer agrees to pay the insured a sum of money in the case of cessation of life of the individual (insured) or after the end of the policy term.
For availing life insurance policy the person needs to provide some details like age, medical history and any type of smoking or drinking habits.
As there are many requirements of persons for availing a life insurance, the requirements can be needs of family, education, investment for old age, etc.
Some of the types of life insurance policies that are prevalent in the market are:
a. Whole life policy: As the name suggests, in this kind of policy the amount that is insured will only be paid out to the person who is nominated and it is only payable on the death of the insured.
Some insurance policies have the requirement that premium should be paid for the whole life while others may be restricted to payment for 20 or 30 years.
b. Endowment life insurance policy: In this type of policy the insurer undertakes to pay a fixed sum to the insured once the required number of years are completed or there is death of the insured.
c. Joint life policy: It is that type of policy where the life insurance is availed by two persons, the premium for such a policy is paid either jointly or by each individual in the form of installments or a lump sum amount.
In the case of such a policy the assured sum is provided to both or any one of the survivors upon the death of any policyholder. These types of policy are taken mostly by husband and wife or between two partners in a business firm.
d. Annuity policy: Under this policy, the sum assured or the policy money is paid to the insured on a monthly/quarterly/half-yearly or annual payments. The payments are made only after the insured attains a particular age as dictated by the policy document.
e. Children’s Endowment policy: Children’s endowment policy is taken by any individual who wants to make sure to meet the expenses necessary for children’s education or for their marriage. Under this policy, the insurer will be paying a certain sum of money to the children who have attained a certain age as mentioned in the policy agreement.
Also see: Business Studies MCQs
2. General Insurance:
General Insurance is related to all other aspects of human life apart from the life aspect and it includes health insurance, motor insurance, fire insurance, marine insurance and other types of insurance such as cattle insurance, sport insurance, crop insurance, etc.
We will be discussing the various types of general insurances in the following lines.
a. Fire Insurance: Fire insurance is a type of general insurance policy where the insurer helps in paying off for any damage that is caused to the insured by an accidental fire till the specified period of time, as mentioned in the insurance policy.
Generally, fire insurance policy is valid for a period of one year and it can be renewed each year by paying a premium, which can be a lump sum or in installments.
The claim for a fire loss must satisfy the following conditions:
i. It should be an actual loss
ii. The fire must be accidental and not done intentionally
b. Marine Insurance: Marine insurance is a contract between the insured and the insurer. In marine insurance, the protection is provided against the perils of the sea. The instances of dangers in sea can be collision of ship with rocks present in sea, attacking of the ship by pirates, fire in ship.
Marine insurance covers three different types of insurance which are ship hull, cargo and freight insurance.
Ship or hull insurance: As the ship is exposed to many dangers at the sea, the insurance covers for losses caused by damage to the ship.
Cargo Insurance: The ship carrying cargo is subjected to many risks which can be theft of cargo, lost goods at port or during the voyage. Therefore, insuring the cargo is essential to cover for such losses.
Freight Insurance: In the event of cargo not reaching the destination due to any kind of loss or damage during transit, the shipping company does not get paid for the freight charges. Freight insurance helps in reimbursing the loss of freight caused due to such events.
Marine insurance is a contract of indemnity where the insured can recover the cost of actual loss from the insurer in event of any loss occurring to the insured item.
c. Health Insurance: Health insurance is an effective safeguard for protection against rising healthcare costs. Health insurance is a contract that is made between an insurer and an individual or a group where the insurer agrees to provide health insurance against certain types of illnesses to the insured individual or individuals.
The premium can be paid in installments or as a lump sum amount and health insurance policy is renewed every year by paying the premium.
The health insurance claims can be done either directly in cashless or reimbursement availed after treatment is done. Health insurance is available in the form of Mediclaim policy in India.
d. Motor vehicle insurance: Motor vehicle insurance is a popular option for the owners of motor vehicles. Here the owners’ liability to compensate individuals killed by negligence of motorists is borne by the insurance company.
e. Cattle Insurance: In case of cattle insurance, the owner of the cattle receives an amount in the event of death of the cattle due to accident, disease or during pregnancy.
f. Crop Insurance: Crop insurance is a contract for providing financial support to the farmers in the event of crop failure due to drought or flood.
g. Burglary Insurance: Burglary insurance comes under the insurance of property. Here the insured is compensated in the event of a burglary for the loss of goods, damage occurred to household goods and personal effects due to burglary, larceny or theft.
This concludes our article on the topic of Types of Insurance, which is an important topic in Business Studies for Class 11 Commerce students. For more such interesting articles, stay tuned to BYJU’S.
Frequently Asked Questions on Types of Insurance
1. What are the 5 major types of insurance?
The five major types of insurance are:
- Life Insurance
- Health Insurance
- Fire Insurance
- Marine Insurance
- Vehicle Insurance
2. What are the characteristics of insurance?
The characteristics of insurance are as follows:
- A contract
- Undertaking of risk
- A cooperative device
- Payment of policy amount on the happening of events
- Contract of adhesion