Page 145 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Personal Financial Planning

Notes 8.4 Rights of the Insurer

The following are the key rights and responsibilities of the insurer:
1. Right to collect the premium from the insured: Insurer has a right to collect in advance a
specified sum as premium for his taking obligation of reimbursing the loss to the insured
as and when it occurs.
An insurer pays the claims to the insured from the pool of funds so build up through
collection of premiums. In fact an insurer loads the premium with his administrative costs
(management expenses and agents commission) as well.
2. Right to specify the rules and conditions that govern the promise made under the policy:
Insurer explicitly states as to what risks the policy covers and the terms and conditions,
subject to which such losses will be reimbursed.
3. Responsibility to pay for the losses occurred and claimed by the insured: Once the insured
suffers losses and lodges claim, the insurer is obliged to honour payments, provided they
are within the contractual terms.
8.5 Rights of the Insured

The following are the key rights and responsibilities of the insured:
1. Obligation to pay the premium to the insurer: Insured has to pay the prescribed premium
to the insurer so as to create a contractual obligation on the part of insurer to reimburse
the losses as and when they occur.
2. Right to collect payment from the insurer if a covered loss occurs: In the event of
materialization of risk, the insured is entitled to claim reimbursement of losses from the
insurer.
3. Obligation to comply with the terms and conditions prescribed by the insurer: Insured has
to comply with all the terms and conditions laid down in the policy and also agreed by
him at the time of creating the policy.
In an insurance contract, one should remember that a right created for one party represents a
duty for the other party. In the event of default of premium or non-compliance of conditions by
insured, an insurer may cancel the insurance or refuse to pay claims/payment of losses.

8.6 Classification of Insurance

The Figure 8.2 classifies the insurance on the bases of life and non-life insurance.

Figure 8.2: Types of Insurance

Types of Insurance

Life Insurance Non-life Insurance

General Insurance Miscellaneous Insurance
1) Marine Insurance 1) Fidelity Guarantee Insurance
2) Fire Insurance 2) Crop Insurance
3) Personal Accident Insurance 3) Burglary Insurance
4) Vehicle Insurance 4) Flood Insurance etc.

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