Insurance is the transfer of equitable and specific risk of possible loss of life, property, or property in exchange for money. This allows the individual or insurance company to take partial or all possible risks from the client in exchange for money (premium). This is part of risk management to avoid unforeseen losses.
By paying premiums to the insurance companies, the insured person or organization is free from all kinds of possible losses and the insurance companies increase their capital by collecting premiums from numerous insured persons or organizations. In addition to the cooperation of the insurer, you can save money privately and be free from the worries of potential risks. Some principles have to be followed in determining the insurance process, type of loss, and compensation.
To be insured by a private company, seven insolvency principles have to be followed:
1. Existence of many factors that may cause similar losses: Since an insurance company pays compensation for losses, in reality, there must be a large number of factors that can cause such losses. For example, Lloyds of London is famous for insuring the lives of popular artists and players and their vital organs. The materials that Lloyds of London insures here are plentiful in real life, and although they may not be the same, they can be categorized as such.
2. Specific Losses: This means that the insurance company will be contracted to compensate for only one or more specific losses. For example, if a car has only fire insurance, then the insurance company will not be obliged to pay any compensation if the car is lost.
3. Accidental damage: That is, the amount of damage must be out of control. If any damage is caused due to negligence, it may not be compensated.
4. Large loss: The amount of loss must be reasonable relative to the insured person.
5. Premium must be affordable: No matter how large the potential loss, the insurance premium must be within the reach of the insured.
The amount of loss must be quantifiable: Since all losses cannot be compensated and the insurance company can only compensate in money, the potential loss must be measured in money.
In the case of natural disasters, the amount of compensation will be limited: For example, the extensive damage caused by floods or earthquakes, insurance companies refrain from paying this amount because such a large amount of compensation is not possible for a single insurance company.
1 The principle of ultimate good faith
2 Principles of insurable interest
3 Principles of Compensation
4 Substitution policy
5 Principles of participation
৬ Damage Prevention Policy
৭ Service Policy
8 Quick demand fulfillment police
9 Salami determination policy
Types of insurance
The contract executed by the insurer with the guarantee of compensation in case of damage to the vessel, ship’s goods, or freight insurance by a certain hazard is called naval insurance or marine insurance. According to Halsbury, a contract that promises to compensate for maritime damage, in a certain way, up to a certain limit, is called maritime insurance.
R.S. According to Sharma, fire insurance is a contract where one party agrees to bear the risk of a certain amount of financial loss to the other party in return for compensation which means the loss or destruction of something by fire. According to MN Mishra, fire insurance is a system that compensates for fires.
Purpose of fire insurance:
1. Compensation: One of the main purposes of fire insurance is to compensate for the damage caused or destroyed by fire.
2. Investment Creation: Insurance companies reinvest a large portion of their fire insurance premiums in various businesses and industries. Insurers engage in the insurance business for such investment.
3. Risk sharing: Since fire insurance also distributes one’s loss among other people in society, it protects a person from major losses alone.
4. Other Insurance Supplements: Life Insurance, Fire Insurance, Naval Insurance, Accident Insurance, etc. No insurance can handle the overall insurance activities alone.
Fire insurance classification: 1. Valuable insurance policy