explain the features of insurance companies . i need a big explanation
Answers
Explanation:
In day-to-day life, the man is confronted with various risks.
However great a genius he may be, it is not possible for him to foresee all the calamities that are in store for him and to provide necessaries for them to advance.
Many happy lives are ruined either by the untimely death of the earning member of the family or by other disastrous calamities such as floods fire, earthquake war, accident, etc. which may take a heavy toll of human life.
These risks are such which cannot be known in advance as to when they win happen and it is physically impossible for an individual to make provision against them by him.
Insurance is a device not to avert these risks but to mitigate they’re rigorous on individuals.
Insurance is defined as a co-operative device to spread the loss caused by a particular risk over a number of persons who are exposed to it and who agree to insure themselves against that risk.
The risk is the uncertainty of a financial loss.
It should not be confused with the chance of loss which is the probable number of losses out of a given number of exposures’.
It should not be confused with peril which is defined as the cause of loss or with a hazard which is a condition that may increase the chance of loss.
Finally;
Risk must not be confused with the loss itself which is the unintentional decline in or disappearance of value arising from a contingency. Wherever there is uncertainty with respect to a probable loss there is a risk.
The risk is the uncertainty of a financial loss. It should not be confused with the chance of loss, which is the probable number of losses out of a given number of exposures.
It should not be confused with “peril” which is defined as the cause of loss or with “hazard” which is a condition that may increase the chance of loss. Before we fully elaborate on the definition of insurance; we should get familiar with the following terms;
The definition of insurance can be made from two points:
Functional Definition and,
Contractual Definition.
Let’s get a brief idea about the tow points;
Functional Definition of Insurance
Insurance is a co-operative device to spread the loss caused by a particular risk over a number of persons, who are exposed to it and who agree to insure themselves against the risk.
Answer:
1. Insurable interest
A person can enter into a contract of insurance only when he has some insurable interest on the life or property which is insured. Insurable interest basically means that the non-existence or any injury or damage caused to a property or life should bring loss which can be estimated in terms of money. So, a person is said to have insurable interest, on the property or life of any person, provided the loss or damage caused to the property or life directly affects him. Thus, a person cannot take insurance for an unconnected property or for an individual with whom he has no connection as there is no insurable interest.
2. Contract of ‘Uberrimae fidei’ or Contract of Utmost good faith
Both the parties to the contract, that is the insured and the insurer have to disclose all the facts connected with the insurance contract. Non-disclosure of facts or declaration of false information will make the contract null and void. A person suffering from a major disease cannot insure under the pretext of having good health by concealing his ailment. If he does so, later when the insurer comes to know about his disease, the contract will become null and void and no compensation can be claimed from the insurance company.