PRINCIPLES OF INSURANCE PDF

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7 Most Important Principles of bestthing.info - Free download as PDF File .pdf), Text File .txt) or read online for free. PRINCIPLES OF INSURANCE. The main principles of insurance are as follows: •. Insurable interest- The legal right to insure arising from the legitimate financial. Explain the meaning of the following terms: i. Indemnity ii. Utmost good faith iii. Insurable interest iv. Subrogation. • Define the term betterment and provide two.


Principles Of Insurance Pdf

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The important principle of insurance are as follows: The main motive of insurance is cooperation. Insurance is defined as the equitable transfer of risk of loss. PRINCIPLES OF INSURANCE. 3/1. Insurable Interest. 3/1. Definition. Importance of Insurable Interest. Its Essential Criteria. How It. Principles of General Insurance. Principles of Insurance. INTRODUCTION . After studying, the life insurance and its importance, the over aspect of.

Pure risks are a part of the environment and are all pervading.

Pure risks which every individual families, firms and other organisations are exposed to can be broadly classified as follows: i Personal Risk: Since all losses are ultimately borne by the people it can be said that all risks are personal but there are some losses such as loss of income, mental or physical suffering etc. Therefore the risk of premature death, sickness, disability, unemployment and even dependent old age are put in this category of Personal risk.

These sort of risks fill in the category of Property Risk. The risks faced by the individual or family and the Industry are common but they differ in nature and the extent of loss.

Notes 1. Family Risks The term family for all practical purposes henceforth includes an individual who may be living with the family or separately. When death will strike is uncertain and the risk is there at any age.

In addition to the loss of income when the head of family dies the family is subjected to expenses on last illness, funeral expenses and settlement of estate not to mention the mental and social burden which cannot be measured in monetary terms but is without doubt very high. Disability This may not be as serious as death but it has definite impact on the income. Expenses will increase due to medical care for the disabled family member.

Poor health as a result of an accident or illness is one of the most important risks which a family has to face. Retirement A person may survive pre-mature death or disability but he still faces loss of income to maintain a reasonable standard of living during retired lifetime.

Unemployment This risk is also an important one for every family. Voluntary Retirement Scheme and Retrenchment are the order of the day. Examples of property risk are innumerable but to illustrate the extent and nature some are being mentioned here. Homes may be destroyed by fire, floods and storms; cars may be damaged in an accident, burnt, be lost, stolen or destroyed; Savings may be lost in stock market crashes or Notes failure of banks.

With a greater awareness amongst the common man the liability risks is ever increasing and the courts in their judgements appreciating the value of human life and right are awarding huge amounts as compensation for which any individual or family can be beyond imagination and intolerable.

Business Risks As we have already said, businesses also face the same risks as the family but in a different manner and the magnitude is bigger. If a partner in a partnership concern dies, the partnership is dissolved and the surviving partners can suffer loss of Income.

In the case of disability of a key employee or partner the firm may be burdened with his medical expenses and may be obliged to continue paying his salary. Firms also to have face the risk of the death or injury to their employees and the burden, which has been transferred to them by law or by contract. The workmen compensation Act is an example whereby the financial burden resulting from disablement or deaths of an employee is placed upon the employer.

In addition dishonest employees may steal from the firm not only material goods but also ideas causing great loss. In this competitive era business houses spend a lot of money on research and development of new concepts but if these are stolen and handed over to other firms in the same field the returns expected from these investments are Notes lost causing great loss. Equipment and property may be damaged or destroyed by rioters or employees on strike.

Strike also cause loss of production. These direct losses may only be a part of the total loss because apart from direct losses due to property damage the business houses also have to bear the indirect loss incurred due to stoppage of operations, disruption in production Loss of profits that they may have to face. For convenience sake these are briefly being dealt with separately but in practice two or more are used in combination.

Risk Avoidance: The simplest way to deal with risk is to avoid it together.

If a factory is to be located on the banks of a river, which is prone to floods every year then it may be decided to shift the site to a safer location. Some people avoid the risk of death or injury in an aeroplane crash by traveling by surface transport only. Though this is the simplest way it is not always practicable. Loss Prevention and Reduction: Notes Possible loss due to risks may be eliminated or minimized by Loss Prevention and Reduction measures.

Segregation of hazardous processes from others in a manufacturing unit and isolation of hazardous goods such as petroleum products from non-hazardous goods in a storage facility are some examples of the method of loss Prevention and Reduction. Risk Retention: It may be consciously decided to retain some risks. Small losses, which may occur frequently may be absorbed by the firm as normal operating expenses such as minor damage or loss of goods in transit.

A financially sound firm may create an Insurance fund to which regular payments are credited and from which losses are paid as and when they occur. This method is used to take care of the domiciliary medical expenses of employees by some large companies having a big workforce.

Some individuals retain the risk of contracting cancer due to smoking not knowing that smoking causes cancer and other even though knowing of it rationalize and pretend that the risk does not exist by saying. Transfer of Risk: Risk transfer occurs when the activity that creates the risks is transferred to another.

For example if a particular process of manufacture is hazardous the firm may decide to get it outsourced i.

Notes Similarly when a person hires an equipment the owner may insert a condition in the contract that any damage to the equipment shall be the responsibility of the hirer. Lease and rental agreements are an example of this method of handling risk.

Guarantees are also a form of risks transfer where the downloader transfers the risk of downloading a defective new item back to the manufacture. Earlier it was not so and the downloader used to download the materials at his own risk and in case of defect had to bear the loss.

There are innumerable ways to transferring the risks and these are only a few illustrations but the most important method of Risk transfer is Insurance. Hazards may be physical, moral or morale. The sources of perils and hazards are social, physical and economic.

Risk is a common characteristics of the environment for individuals, families and firms.

7 Most Important Principles of Insurance

All are exposed to personal risk, property risk and liability risk. What are various sources of risk?

Explain various risk assumption. Statement A: Risk can be avoided.

2) Principle of Insurable Interest

Statement B: Risk can be transferred. This principle is observed more strictly in property insurance than in life insurance. The purpose of this principle is to set back the insured to the same financial position that existed before the loss or damage occurred. Principal of subrogation: The principle of subrogation enables the insured to claim the amount from the third party responsible for the loss.

It allows the insurer to pursue legal methods to recover the amount of loss, For example, if you get injured in a road accident, due to reckless driving of a third party, the insurance company will compensate your loss and will also sue the third party to recover the money paid as claim.

Double insurance: Double insurance denotes insurance of same subject matter with two different companies or with the same company under two different policies. Insurance is possible in case of indemnity contract like fire, marine and property insurance.

The insured cannot recover more than the actual loss and cannot claim the whole amount from both the insurers. This principle is applicable when the loss is the result of two or more causes. An insurable interest must exist at the time of the download of the insurance. For example, a creditor has an insurable interest in the life of a debtor, A person is considered to have an unlimited interest in the life of their spouse etc.

Indemnity means security or compensation against loss or damage. The principle of indemnity is such principle of insurance stating that an insured may not be compensated by the insurance company in an amount exceeding the insureds economic loss.

In type of insurance the insured would be compensation with the amount equivalent to the actual loss and not the amount exceeding the loss.

This is a regulatory principal. This principle is observed more strictly in property insurance than in life insurance. The purpose of this principle is to set back the insured to the same financial position that existed before the loss or damage occurred. The principle of subrogation enables the insured to claim the amount from the third party responsible for the loss.

It allows the insurer to pursue legal methods to recover the amount of loss, For example, if you get injured in a road accident, due to reckless driving of a third party, the insurance company will compensate your loss and will also sue the third party to recover the money paid as claim.

Double insurance denotes insurance of same subject matter with two different companies or with the same company under two different policies.

Insurance is possible in case of indemnity contract like fire, marine and property insurance.

The 7 Principles of Insurance Contracts: When You Need A Lawyer

Double insurance policy is adopted where the financial position of the insurer is doubtful. The insured cannot recover more than the actual loss and cannot claim the whole amount from both the insurers. Proximate cause literally means the nearest cause or direct cause. This principle is applicable when the loss is the result of two or more causes.

The proximate cause means; the most dominant and most effective cause of loss is considered.

This principle is applicable when there are series of causes of damage or loss. Aluminium Bauxite: Natural Compounds and its Uses Globalization: Recent Trends in Globalization Span of Management: How to Determine Proper Span? Concept and Major Components of an Ecosystem Explained!

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Sushil K February 13, at 6: Once we realize that our expectations are less than certain and that actual events may differ from what we expected, uncertainty creeps into the mind and uncertainty is something, which most people are not comfortable with. Management Accounting: Pure risks which every individual families, firms and other organisations are exposed to can be broadly classified as follows:

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