INTRODUCTION We are exposed to many risks in our day to day life. Nobody can predict what may happen in the next moment. There may be an accident, calamity, theft, loss due to certain other cause etc. Similarly, there are always risks in business. Everybody feels like shifting the risk to some agency which can compensate in case of loss or damage. MEANING OF RISK : Risk is expressed differently by people. To some, it is the chance or possibility of loss, to others, it may be uncertain situations. The word ‘risk’ has been defined as follows: “Risk is a condition in which there is a possibility of an adverse deviation from a desired outcome that is expected or hoped for”.

DEFINITION OF INSURANCE  CONTRACTUAL DEFINITION : In the words of E.W. Patterson, “Insurance is a contract by whichg one party, for a consideration, called premium, assumes a particualr risk of the other party and promises to pay to him or his nominee a certain or ascertainable sum of amount on a specified contingency.”

IMPORTANT TERMS USED IN INSURANCE INSURANCE TERMS INSUREDINSURERCONTINGENCYRISKPERILPREMIUMCOMPENSATION INSURANCE POLICY INSURED AMOUNT

NATURE & SCOPE OF INSURANCE 1. sharing of risk2. Cooperative instrument3. Evaluation of risk4. Payment is linked to contingency5. Contract6. Consideration

Continued…… 7. Good Faith8. Contract of Indemnity9. Insurable Interest10. The Amount11. Large no. of insured persons12. It is not gambling and charity

FUNCTIONS OF INSURANCE PRIMARY FUNCTIONS SECONDARY FUNCTIONS OTHER FUNCTIONS

PRIMARY FUNCTIONS Providing Cover for Risk Distribution of LossProvides SecurityProvides CertaintySharing of Risk Helping Businessmen SECONDARY FUNCTIONS Provides Funds for Development Helps in Increasing Efficiency Helpful in Reducing Losses Proper Assessment of Projects

KINDS OF INSURANCE GENERAL INSURANCEa) Marine Insuranceb) Fire Insurancec) Social Insuranced) Liability Insurancee) Other insuranceLIFE INSURANCEOTHERSa) Double Insuranceb) Reinsurancec)Over Insuranced) Under Insurance

CHARACTERISTICS OF INSURANCE

BASIS OF DIFFERENCEASSURANCEINSURANCE 1. ScopeThis word is used only in Life Insurance contract. Hence the scope is limited. The word is used to describe all other types of insurance. Hence the scope is wider 2. Renewal of PolicyRequirement of renewal of policy is only if policy lapse as lifer insurance contract is a continuing contracts. Indemnity insurance is only for maximum one year. It lapses automatically after one year. It can e renewed every year. 3. Certainty of eventThe happening of event is certain but time is uncertain The event is not certain. It may happen or not. 4. Insured SumInsurance policies can be taken for any amount or any number Policy amount is equal to the market value of property because the amount of indemnity cannot be more than the actual value of property ASSURANCE AND INSURANCE

5. Certainty of payment of claim Payment of claim is certain. It may be either on maturity of the policy or on the death of the assured Payment of claim is not certain. It is paid only in case of loss of the asset insured 6. Element of InvestmentThere is element of investment in assurance as payment of sum assured is certain either on death or on maturity of the policy. There is no element of investment as certainty of payment depends upon the happening of element. 7. Amount of claimInsurance company makes the payment of policy amount in full on the maturity or on death Amount of claim cannot be more than actual loss or amount of asset in any case

8. Principle of Indemnity Principle of Indemnity is not applicable in case of assurance. Sum assured is paid in full extent of amount insured irrespective of any profit or loss Principle of Indemnity is applicable. The basis of insurance contracts is the principle of indemnity. 9. AssuranceInsurance companies assure the insured to compensate in case of maturity of policy or death Insurance companies only promises to compensate in case of actual loss 10. Time of Insurable interest It is proved at the time of Contract. It is not necessarily be present at the time of payment of claim Insurable Interest must e present at the time of loss in case of marine insurance.

RELEVANCE OF INSURANCE RELEVANCE TO AN INDIVIDUAL RELEVANCE TO BUSINESS RELEVANCE TO SOCIETY 1.Insurance provides security, safety 2.Insurance affords peace of mind 3.Insurance protects mortgaged property 4.Insurance eliminates dependency 5.It encourages savings 6.Profitable investment 7.It fulfils needs of person 1.Insurance provides security, safety 2.Insurance affords peace of mind 3.Insurance protects mortgaged property 4.Insurance eliminates dependency 5.It encourages savings 6.Profitable investment 7.It fulfils needs of person 1.Wealth of the society is protected 2.Economic growth of the country 3.Reduction in inflation 1.Wealth of the society is protected 2.Economic growth of the country 3.Reduction in inflation 1.Uncertainty of business losses is reduced 2.Business efficiency is increased 3.Keyman indemnification 4.Enhancement of credit 5.Business continuation 6.Welfare of employees 1.Uncertainty of business losses is reduced 2.Business efficiency is increased 3.Keyman indemnification 4.Enhancement of credit 5.Business continuation 6.Welfare of employees