insurance

 02. Define insurance? And clarify its characteristics. 

Meaning of Insurance 

insurance refers to a contract under which one party promises to protect the other party in case of loss, and the person who promises to protect the other party from loss is called the Indemnifier, and the person who receives the promise of protection from loss is called the Indemnity holder. 

Characteristics of Insurance 

The main characteristics of insurance are as follows: 

1. Contract: Insurance is a contract. 

2. Elements of a Valid Contract: In insurance, all the elements of a valid contract are essential, such as proposal, acceptance, valid consideration, capacity of parties, and lawful object etc.

3. Principle of Indemnity: The principle of indemnity is very important in insurance. 

4. Wide Scope: The scope of insurance is very wide, under which various types of insurance are included. 

For example:-Life insurance, Fire insurance, Marine insurance, Social insurance. 

5.Insurance is not gambling:- Insurance is not gambling because the policyholder knows that in case of loss, compensation will definitely be received. 

Functions of Insurance 

The main functions of insurance are as follows: 

Broadly, the functions of insurance can be divided into the following three parts: 

1. Primary functions 

2. Secondary functions 

3. Indirect functions 

1.Primary Functions: The primary functions of insurance are as follows: 

1.Reducing the uncertainty of risk: The first and most important primary function of insurance is to reduce the uncertainty of risk. 

2. Providing security: The second and most important primary function of insurance is to provide security. Through this, any person can make themselves secure by getting insurance. 

For example, Fire insurance. 

2. Secondary functions : The Secondary functions of insurance are as follows: 

1.Arrangement of Capital: The first and most important auxiliary function of insurance is to arrange capital. 

2.Protection from Loss: The second and most important auxiliary function of insurance is to protect from loss. This is because, in the present time, insurance companies provide facilities to individuals to avoid losses by getting insurance. 

3. Indirect Functions: Following are the main indirect functions of insurance: 

1.Providing Opportunities for Savings: The first and most important indirect function of insurance is to provide opportunities for savings. Under this, individuals can increase their savings by purchasing an insurance policy. 

2.Providing Investment Opportunities: The second and most important indirect function of insurance is to provide investment opportunities. 

3.Promoting Exports: The third and most important indirect function of insurance is to promote exports. because, in the absence of insurance, foreign trade was very low previously. 

4.Assisting the Government: The fourth and most important indirect function of insurance is to assist the government.

. This is because insurance companies collect insurance funds and invest them in various types of securities. 

Types of Insurance 

The main types of insurance are as follows: 

1. Life Insurance:  life insurance refers to insurance taken for the purpose of protection against loss arising due to death. Under this, the insuring company promises to pay a specific sum to the legal heir of the insured person after a fixed period in exchange for a fixed premium. 

2. Fire Insurance:  fire insurance refers to insurance taken for the purpose of obtaining protection against losses caused by fire. Under this, the insuring company promises to pay a fixed sum to the insured person after a fire incident. It is noteworthy that fire insurance is typically taken for a period of only one year. 

3. Marine Insurance :- marine insurance refers to such insurance that is undertaken to obtain protection from collective, unexpected losses arising due to reasons like a ship sinking or colliding with rocks . 

Under this, the insurance company promises to pay a fixed amount to the insured person in exchange for a fixed premium if the ship sinks or collides with rocks. 

Currently, the work of marine insurance is carried out by the General Insurance Corporation. 

4. Social Insurance :- social insurance refers to such insurance that is undertaken to obtain protection from losses arising due to social calamities (crises). Under this, the insurance company promises to pay a fixed amount to the insured person in exchange for a fixed premium upon the occurrence of a social event.

For Examples:-  unemployment insurance and old age insurance. 

Benefits of Insurance 

The benefits of insurance can be divided into the following three parts: 

1. Benefits to Business 

2. Benefits to Society 

3. Benefits to the Nation 

1. Benefits to Business: 

Businesses receive the following benefits from insurance: 

1.Protection from Risk: Insurance companies provide protection to businesses from risks. 

2.Facilitation in Obtaining Loans: Insurance companies facilitate businesses in obtaining loans. Because in the present time, we see that any person prefers to lend money on goods/property that has been insured. 

4.Encouragement to Exports: Insurance companies encourage exports, the benefit of which is received by the business. 

2. Benefits to Society: 

Society receives many benefits from insurance. 

1. Increase in Employment: Insurance leads to an increase in employment. 

Because insurance is a very extensive business, under which millions of people are being employed. 

2.The father of social security. 

3. Insurance is helpful in capital formation. 

3.Benefits to the Nation 

The nation gets the following benefits from life insurance: 

1. Insurance is helpful in foreign trade. Insurance is helpful in foreign trade. 

2. Insurance is helpful in controlling inflation. Insurance is helpful in controlling inflation.