Page 58 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Unit 4: Contract of Insurance

are worried about these two aspects. If one dies pre-maturely, who will take care of the Notes
dependents? If a person lives longer than his working age then who will support him? These
problems are solved by various policies offered under the head of personal insurance. Life
insurance, endowments and annuities protect the individual and his or her dependents against
the undesirable financial consequences of premature death and superannuation.
A pension fund provides regular income to the individual after his retirement. A fund which
covers the loss of income from unemployment after accident and sickness is defined as “insurance
against loss by sickness or accidental body injury”. The loss incurred may be the loss of income
caused by sickness, accident or the expenses towards doctor’s bills, medicines, etc. Insurance
provides lump sum or periodic payments in the event of loss occasioned by sickness or accident.
Property Insurance: As the name suggests, this type of insurance covers the risk of loss of
property. It is designed to protect against losses resulting from damage to or loss of property
and losses arising from legal liability arising by use of vehicle/asset. It is distinguished from
personal insurance in the sense that while personal insurance covers perils that may prevent one
from earning money which can be used to accumulate property in the future, property insurance
covers property which is already accumulated.

Did u know? Property insurance includes fire insurance, marine insurance, liability
insurance, causality insurance and surety insurance. These are termed in India as general
insurance.
Fire Insurance: Fire Insurance covers are designed to indemnify the insured for loss of or damage
to furniture, fixtures, buildings and other personal property as a result of fire, explosion, lighting,
windstorm, etc. Originally only fire was an insured peril, but the numbers of perils insured
against are gradually being expanded over the years. Nowadays, two basic covers are considered
with respect to perils. First coverage is called peril coverage. Under peril coverage, some specific
coverage is listed in the policy and the coverage applies only to damage arising out of listed
perils.
The second coverage is the open coverage. In this coverage, perils for which coverage is not
provided are specified, rest all are covered. Therefore, the loss from any peril, not mentioned in
the policy is covered. Coverage may be provided for both direct and indirect loss.
Marine Insurance: Marine insurance, indemnifies the financial loss resulting from damage to
property due to the perils that are primarily those associated with water transportation. Marine
insurance is divided into ocean marine insurance and inland marine insurance.

Ocean Marine Insurance: It is designed to protect all types of ocean going ships and
vessels, but cargo is covered by insurance only after it is loaded on the ship. Nowadays,
policies are designed in such a way that they cover the cargo from “warehouse to
warehouse”, i.e., they protect the risk on land as well as during ocean transportation.

Inland Marine Insurance: It covers the goods being transported by different types of
carriers like trains, trucks, ships or barges on the inland waterways.
This insurance extends cover to wide areas of transportation and communication such as bridges,
tunnels, power transmission lines and radio and television and communication equipment.
Hence, it is widely used to cover different types of in-transit property.
Liability Insurance: Liability insurance may cover a wide range of risks arising under various
branches of motor, marine and aviation insurances and also under the liability of employers
and public ownership of property, manufacturing and construction operations, the sale and
distribution of products and many other exposures.

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