Insurance

Insurance is used to safeguard the interests of people from uncertainty by providing that type of instrument payment at a given interest. The insurance idea is highly used in modern times.


Importance of insurance

Insurance has many importance in individuals life, social life and society for transforming our evil modernity, too. The role and importance of insurance are as follows:

  • Individual, and family
  • To business or industry,
  • To the society.

To individual and family

  1. Security and Safety:
    The insurance provides safety and security against the loss on any event. In other words, security against premature death and old age are provided by life insurance. the property of insured is secured against loss on a fire in fire insurance. Insurance provides security against the loss at damage, destruction or of property, goods, furniture and machines too.
  2.  Peace of Mind:
    Insurance helps in reducing fear and uncertainty, fire accident, damage and death . these risks are almost beyond the control human and in occurrence of any of these events people can bear loss of peace of mind. By insurance much of the uncertainty that causes the loss of peace inside an individual is eliminated.
  3. Insurance protects Mortgaged Property:
    When an insured dies and the insured property is not named to any other nominee then that property is protected by the insurance company or is given to the closest member of the family. On the other hand, the mortgagee wishes to get the property insured because at the damage to the property he will lose his right to get the loan replayed.
  4. Life Insurance encourages saving:
    Insurance encourages the habit of saving to an individual because the insured should compulsorily pay the amount of premium in time as stated in the agreement . Systematic saving am possible because regular premiums are required to be compulsorily paid. In insurance the deposited premium cannot be withdrawn; only the deposited amount along with the interest is paid. The insurance, thus, provides the wished amount of insurance and the bank provides only the deposited amount, grace of 3-4 days is also rewarded.
  5. Family Needs and old age:
    Every person is responsible for the welfare of family insurance thus helps to ensure peace and prosperity to all the family members with protection of life , property they own , health and financial risk on their particular investment. When people turn old they cannot earn . They may or may not get pension as per their nature of contribution in their youth and as per their nation’s concerns. So, insurance helps them to move their livelihood ahead due to helping them replaying back their insured amount in time when they need the most Education. There are certain insurance policies, and annuities which are useful for education of the children irrespective of the death or survival of the father or guardian.
  6. Uncertainty of business losses is reduced:
    I
    ndustry has a huge number employed people With a slight negligence, the property may be destroyed. The accident may harm not only to the individual or property New establishment are possible only with the help of insurance.
    A employed people also may not be sure of his life and again, the owner of a business might be in great loss, by making an annual payment, to secure immediately, insure policy can be taken.
  7. Business-efficiency is increased with insurance:
    When the owner of a business is free from of losses, he will certainly devote much time to the business. The care free owner can work better for the maximization of the profit. The new as well as old businessmen are guaranteed payment of certain amount with the insurance policies at the death of the person; at the damage, destruction or disappearance of the property or goods. The insurance, removing the uncertainty, stimulates the businessmen to work hard.
  8. Enhancement of Credit:
    If the property of the business enterprise is insured then that insurance company on behalf of the creditors can help to get loan very easily.
  9. Business Continuation:
    Any partnership business may discontinue at the death of any partner although the surviving partners can restart the business, however there can be many kinds of losses/ but Each partner may be insured for the amount of his interest in the partnership. With the help of property insured, the property of the business is protected against disasters and the chance of disclosure of the business due to the tremendous waste or loss.
  10. Welfare of Employees:
    Employees are the assets of the organization. Thus, business firm fulfill the responsibilities by doing insurance for employees. It is the welfare of employees from which the firm can move to its destination with the help of employees.
  11. Wealth of the society is protected:
    The loss of a particular wealth can be protected with the insurance. Life insurance provides loss of human wealth, human material can generate less income. Similarly, the loss of damage to property at fire, accident, etc., can be well settles by the property insurance; cattle, crop, profit and machines are also protected against their accidental and economic losses. With the advancement of the society, the wealth or the property of the society attracts more hazardous and, so new types of insurance are also invented to protect them against the possible losses. Each and every member will have financial security against old age, death, damage, destruction and disappearance of his wealth including the life wealth. Through prevention of economic losses, instance protects the society against degradation.
  12. Economic Growth of the Country:
    For the economic growth of the country, insurance provides strong protection against loss of property and adequate capital to produce more wealth. The agriculture will experience protection against losses of cattle, machines, tools and crop. This sort of protection brings more production in agriculture, industry, factory machines. insurances provide more confidence to start the industry and welfare of employees create a better atmosphere to work: Similarly in business, too, the property and human material are protected against certain losses; capital and credit are expanded with the help of insurance. Thus, the insurance meets all the requirements of the economic growth of a country.


Life Insurance Meaning

Life insurance is the most important kind of insurance in which human life is insured for financial security of dependents. The life of an individual is important not only to himself, but other many people depend upon him. If he/she dies the problem may be created to his/ her dependents. Future is uncertain and human life is also uncertain. Thus, an individual may take leave from his world at any time so life insurance is most essential because it protects from such risk. The main objective of life insurance is to provide financial security to the insured person and his or her dependents from many kinds of risk such as death, old age, disability and so on.

The insured pays the premium in installment basis to the insurer instead of bearing any risk. If an inured person dies before the insured period, insurer pays insured amount to his family and if the insured person is alive at the end of the maturity period, she/he takes the amount himself/herself.


Classification of life insurance policy
  1. Whole life insurance policy: Whole life insurance policy is defined as an insurance in which the insured person pays the premium in the installment basis for full duration of his/her life. After the death of insured, his/her nominee receives the insured amount. There are 3 types of whole life insurance policy:

    1. Ordinary whole life insurance policy: In this policy, insured person has to pay the premium to his/her concerned insurance company till his/her death. The insured person can’t utilize the insured amount because this amount will be returned after his/her nominee.
    2. limited premium whole life insurance policy: Under this policy, the insured person has to pay the premium for limited time and the insured amount will be returned after the death of insured person to his/her nominee.
    3. Convertible whole life insurance policy: It is that type of policy which can be converted to endowment life insurance policy after a certain time. It is suitable for those people who have lower income at present, and they hope for increment in income in the near future.
  2. Endowment life insurance policy: It is defined as that type of insurance in which the insured person pays the premium for a certain time and after certain time they receive insured amount. If she/he dies before the insured period his/her nominee receives the insured amount. Generally endowment life insurance policy is done for 10, 15 20 years and more. The insured has to pay the premium either till the end of insured period or till the death of insured which ever is earlier.

    1. Ordinary endowment life insurance policy: Under this policy, time will be fixed for a certain period and insured person have to pay either till the end of insured period or till his/her death. If he/she dies earlier before insured period, his/her nominee receive the amount. And if she/he is alive than himself/herself go and receive the amount.
    2. Joint endowment life insurance policy: In this policy, two or more persons are involves s the insured person. The premium amount should be paid till the insured person’s death like in ordinary endowment life insurance policy.
    3. Double endowment life insurance policy: Under this policy, the insured person receives double of the insured amount is she/he is alive till the end of the maturity time. If she/he dies before the insured person his/her nominee receive only single insured amount.
    4. Pure endowment life insurance policy: Under this policy, insured person receive the insured amount after the certain time when he/she is alive. If the insured person dies before the end of maturity time the insurer becomes free from its liability.
  3.  Term life insurance policy: Straight term life insurance policy: Under this policy premium is paid as lump sum money. The insured time maturity period is not more than 2 year. Therefore, it is known as temporary term life insurance policy. If the insured person dies before the insured period his/her nominee receives the insured amount. But if he/she is alive then he/she doesn’t receive anything.

    1. Straight term life insurance policy: Under this policy premium is paid as lump sum money. The insured time maturity period is not more than 2 year. Therefore, it is known as temporary term life insurance policy. If the insured person dies before the insured period his/her nominee receives the insured amount. But if he/she is alive then he/she doesn’t receive anything.
    2. Renewal term life insurance policy: Under this period the insurance can be renewed after the maturity of the insured period. Second rate of premium may be higher than the first-rate of premium. Because the age of the person also increases with renew of insurance. It doesn’t need a new health report or any sort of gent report for renewal.
    3. Convertible term life insurance policy: It is generally done for 5, 6 or 7 years like term life insurance policy. If the insured person want to convert this insurance policy in whole life insurance policy and endowment life insurance policy it can easily be converted.
  4. On the basis of profit distribution:

    1. With profit policy: Under this policy the insured person receive the insured amount with the profit of insurance company. In other words if the insured person dies before the term of insured period his/her nominee receive only insured amount not the profit o the company. But if he/she is alive then with the amount of premium the portion of profit of the insurance company is also received by the insurer.
    2. Without profit policy: Under this policy the insured person doesn’t receive the insured amount with the profit of insurance company. In other words if the insured person dies before the term of insured period or remains alive till the end his/her nominee or himself/herself receive only insured amount not the profit o the company.
  5. On the basis of number of insured:

    1. Single life insurance policy: Under this policy there is only one individual as an insured person. In other words, the life of a single person is done insurance. Single life insurance policy is applied in whole life insurance policy, endowment life insurance policy and term life insurance policy.
    2. Joint/ multiple life insurance policy : Under this policy two or more than 2 people are involved as husband and wife, partners of partnership firm and other people may conduct the joint life insurance policy. It may be applied in whole life insurance policy and endowment life insurance policy.
  6. On the basis premium payment:

    1. Single premium life insurance policy: Under this policy, insured person pay the premium to the insurance company at the beginning in the lump sum amount. There is no tension to pay the premium timely later on. It is mostly used in that case when a person wins a lottery.
    2. Regular premium life insurance policy: Under this policy the insured person pay the premium up to his/her death for a certain time. In other words, the insured person pays the premium to insurance company regularly or timely.
    3. Limited payment premium life insurance policy: Under this policy the insured person pay the premium up to his/her death for a certain time. The time is however less than the insured period.
  7. On the basis of payment of insured mount :

    1. Lump sum payment policy:  Under this policy the insured person receives the total insured amount. Even all premiums have not been paid total insured amount is received by the nominee of the insured person and if the total amount has been paid she/he receives the total insured amount himself or herself.
    2. Installment payment policy: Under this policy, the insured person and nominee receive the insured amount in the installment basis. It is useful to those individual who are old and lump sum mount may be misused.


Procedure for effecting Life Insurance policy

  1. Proposal form:  First proposal form must be filled by the proposer. This form is available in the office of insurance company or its agent. Generally name, age, address, occupation, father’s name, gender, nominee’s name etc. are expressed in the proposal form.
  2. Agent’s report: In the report agent has developed a statement in which heath condition of the proposer. His/her nominee and sources are explained. The agent sends his report to the insurance company. And the company studies the report before accepting the proposal.
  3. Medical examination:  Doctor conducts the medical examination of proposer. After checking the health of proposer, doctors develop the report and sends to the insurance company. According to the study of this report, insurance company decides about the insurance.
  4.  Proof of age: The age of individual who want to do insurance is very important because age is the major factor of death. On the basis of age the insurance company determines the premium rate. Sometimes, insurance company doesn’t believe on the age of the proposal form, the proposer has to submit the certificate in which the date of birth is identified.
  5.  Acceptance of proposal: The insurance companies accept the proposal only after studying all the information about the proposal from, personal statement, proof of age, report of the agent and report of doctor are studied. It must be doe very carefully.
  6.  Payment of first premium: If proposer is not agreed about the rate of premium and other condition, s/he doesn’t pay the first premium. The rate of premium is then determined and is paid b proposer to insurance company. Only after the payment of premium the insurance is considered valid.

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