Insurance - Types

By: Prachi Kulkarni

Classification
Life Insurance
-Features
-Types
General Insurance
-Features
-Types

September 10, 2010

Types of Insurance

Classification
Life Insurance
General Insurance

2
Types of Insurance

Features:
Life Insurance

3
 Life Insurance
What is life insurance policy?
Life insurance is a contract between the assurer
Types of Insurance

and the assured under which the assurer on the

payment of premium, agrees to pay certain sum
of money on the expiry of the certain period, or
on death, whichever is earlier.
Benefits of Life Insurance
• Financial Protection to the family members
• Encouragement to save regularly
• Premium paid on LIC policies is eligible for tax
concession under section 80C
• Can be kept as securities against bank loans
 Life Insurance - Features
Subject Matter
Human life is the subject matter of Life Insurance
Types of Insurance

Term of Contract
Life Insurance contract is generally for longer
term.
Surrender
Life Insurance policy can be surrendered before
maturity.
Return on Investment
Long term Life Insurance policy provides decent
return on investment.
 Life Insurance-Features
When insurable interest must be present?
• In life insurance:
Types of Insurance

at the time of taking a life insurance

policy
• In fire and general insurance:
at the time of taking policy and
also at the time of occurrence of loss.
Indemnity means ‘a guarantee to pay for the
loss occurred’, This is not applicable to life
insurance, as the loss of life can not be
measured in terms of money.
Types of Insurance

Types:
Life Insurance

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Types of Insurance

Types of Life Insurance Policies

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 Endowment Policy
Meaning: This is the most popular form of life insurance
policy. Under this, the money assured becomes payable
Types of Insurance

only at the end of specific number of years or at the

death, whichever is earlier.
Premium: has to be paid till the maturity of the policy if
the assured remains alive.
Suitability: those who wish to save money regularly and
plan to use it after specific number of years.
Beneficiary: Its beneficial to both, assured & dependents
Types: Pure, Ordinary, Joint Life
 Whole Life Policy
Meaning: Under this, the money assured
becomes payable only at the death of the
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assured.
Premium: has to be paid through out the
life time of the assured.
Normally premium amount is low.
Beneficiary: only the family members of
the assured & not the assured himself.
Suitability: those who wish to protect
interest of dependents with least cost.
 Limited Period Whole Life
Policy
Meaning: Under this, the money assured
becomes payable only at the death of the
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assured, but premiums are not payable

throughout the life of the assured
Premium: has to be paid till the pre-determined
period of time if the assured remains alive.
Assured knows the total amount he will be paying
as premiums.
Beneficiary: only the family members of the
assured & not the assured himself.
Suitability: those who wish to protect interest of
dependents with least cost.
 Convertible Whole Life Policy
Meaning: Under this, the whole life policy is
taken in earlier years, premiums are payable
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at a lower rate.
After a certain period assured is given an
option to convert it into endowment policy. If
the assured opts for such conversion, the
premium amount increases.

Suitability: young persons with good chances

of increase in income after some years.
 Joint Life Policy
Meaning: Here, lives of two or more persons
are assured under one policy, the amount is
Types of Insurance

payable on maturity or on first death of any of

lives assured, whichever is earlier.
Premiums: Regular and high amounts
Suitability: partnership firms, husband-wife
 With Profit Policy
Meaning: The assured is paid the
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amount of money insured plus a

share in the profits earned by the
insurance company every year.
 Annuity Policy
Meaning: The insurer pays amount
not in lump sum, but monthly,
Types of Insurance

quarterly, half-yearly, yearly

installments after the assured has
attained a certain age.
Suitability: those who prefer
regular income in their old age.
 Childern's Endowment Policy
Meaning: This may be taken for
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the provision of the child’s

marriage or education in case of
death of the assured.
Types of Insurance

Features:
General Insurance

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 General Insurance
What is general insurance policy?
General insurance is a contract between the
Types of Insurance

insurer and the insured under which the insurer,

agrees to compensate certain sum of money on
the happening of an uncertain event, against the
timely payment of premiums.
Examples of General Insurance
• Fire Insurance, Marine Insurance, Health
Insurance
 General Insurance - Features
Subject Matter
Goods, property or any other form of asset.
Types of Insurance

Term of Contract
Normally short term.
Surrender
General Insurance policy can not be surrendered
before expiry.
Return on Investment
General insurance policies do not provide return
on investment.
 General Insurance-Features
When insurable interest must be present?
• In fire and general insurance:
Types of Insurance

at the time of taking policy and

also at the time of occurrence of loss.
• In marine insurance:
only at the time of occurrence of loss.
Indemnity means ‘a guarantee to pay for the
loss occurred’, This principle is applicable
to general insurance as also the principle
of subrogation.
Types of Insurance

Types:
General Insurance

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 Fire Insurance Policy-Features
• Under this policy, the insurer agrees to compensate
the insured against the loss to building, machinery,
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furniture, goods etc. due to fire.

• Fire policy rates for various types of fire are different
• Discounts in standard premiums are allowed if fire
fighting/protection appliances are used, on regular
basis, by the policy-holders.
• Loading in premium is done if other type of perils are
covered. E.g. multiple occupancy industrial estates.
 Fire Insurance Policy- Types
Specific: covers the loss up to a certain amount,
which is less than the real value of the property. It
Types of Insurance

is a case of under-assurance.
Comprehensive: covers losses against risks like
fire, theft, burglary, third party risk etc. It is also
known as ‘all-in-one policy’, It may also cover loss
of profits during the period the business remains
closed due to fire.
Valued Policy: amount payable is fixed at the
time of taking policy. Valuation of loss is not done.
Floating: covers property at different places, may
be warehouses at different locations.
 Marine Insurance Policy-
Features
• This policy not only covers sea-going vessels
but also transportation of goods by rail/road,
Types of Insurance

in transit.
• Cargo insurance covers transit insurance of
goods.
• The risks are covered till 7 days of arrival at
destination. The risks include- fie or explosion,
vessel being sunk, Derailment of land carrier
or rail wagon, collision with external object,
lightning, breakage of bridges, overturning of
vehicle.
 Marine Insurance Policy- Types
Voyage: covers one journey by sea, time
needed is not considered, ends after the
Types of Insurance

goods reach port of delivery. This is popular

among exporters.
Time: covers the specified time period only.
Valued: amount payable is fixed at the time of
taking policy. Valuation of loss is not done.
Floating / open cover: covers all ships of a
policy holder, particular ship or a specific
journey is not considered.
 Other Types of General
Insurance
Motor Insurance: Motor vehicle Act 1988, has made it
compulsory to take third party insurance for every vehicle owner.
A comprehensive vehicle insurance also covers loss due to other
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reasons.
Personal Accident Insurance: pays fixed compensation for
death or disablement resulting from accidental bodily injury.
Heavy risks attract heavy premiums e.g. persons working in
underground mines, electrical installation etc.
Health Insurance: reimbursement of hospitalization and medical
expenses for illness.
Others: crop, cattle, cash in transit insurance etc.
Types of Insurance

Insurance
 Types of Insurance

Thank You !

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