Every person wants happiness, profit and Security. He does not want adversity, Sorrow and risk. Hence he makes efforts to free from misshapenness, but his efforts fail before some happiness. He has to incur from general to serious losses due to different calamities. On the untimely death of the head of the family the dependents due to fire in the godown the industrialist, or shopkeeper, due to Sinking or looting of ship businessman has to incur financial loss. It means the whole life atmosphere is full of uncertainties and risks. The need for gaining security from these losses brought insurance into existence.
TYPES OF INSURANCE
There are three types of insurance -:
a) Life Insurance
b) Fire Insurance
c) Marine Insurance
Life insurance originated for the first time in England on 18th June, 1583. On this day life insurance of Sh. William Gybbon of England was done for one year. In seventeenth and eighteenth century life insurance developed on commercial basis. Life Insurance was started in India in 1870 with the establishment of Bombay Mutual Insurance Society Limited. After this Oriental Life Insurance Company was established in 1874.
Meaning of Life Insurance
Life insurance is a contract in which the insurer in consideration of premium promises to pay certain sum of money to the insured Person after the maturity of a certain period or to the nominated person in event of his death. When death will occur is not certain. This uncertainty is the risk which gives birth to insurance for the indemnity of the loss of the karta (doer). According to the Federation of Insurance Institutes, Mumbai : “Life Insurance is a contract in which the insurer promises to pay a certain amount in return of premiums to the insured or to his successor in event of loss of life.” According to the Life Insurance Corporation of India: “Life insurance is a contract in which a sum of money is paid to the either insured on the expiry of a fixed period or to the nominated person on the happening of death.”
Characteristics of Life insurance
The main characteristics of the life insurance are the following: 1. In this there are two main parties – one the insurer and the other one the insured. 2. This is contract between the insurer and insured.
3. This is a cooperative device for transfer of risks of individual among a large number of persons by spreading the loss. 4. The insurer pays a certain amount periodically as premium to the insurer. 5. The insurer is bound to pay the insured sum to the insured in event of death or on the maturity of the policy. 6. Life insurance is a device for the insured person for economic protection against risk. 7. If the premiums are not paid regularly by the insured to the insurer the contract becomes automatically null and void. 8. It is different from indemnity insurance.
Functions and Objects of Life Insurance
The main objects and functions of life insurance are the following :
1. Family protection: The main object of life insurance is to provide protection for the family. In event of untimely demise of the earning member, the life insurance makes substitute provisions to reestablish the capability of earning to the family so that the members of the family may not suffer economic hardships at that time. 2. Provisions for money in old age: It has been observed that a man can make earnings up to a certain age of 60 years. In other words his income after attaining the age of 60 either becomes little or almost ceased in general. In this age he needs Mindy. The second object of life insurance is to provide arrangements for money for the person in old age or after retirement so that he might spend his remaining days of life comfortably. 3. Provision for savings: A man starts his savings...