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Features and Nature of Insurance
- 1. Protection against risk – Insurance is a powerful way to protect against risks. Makes a person free from all the uncertainties prevailing in life. These risks may relate to life, health, rights and financial resources, assets.
- 2. Method of Spreading the Risks – In insurance, work is done on the basis of cooperative spirit “one for all and all for one” . A fund is formed by collecting people who are surrounded by similar types of risks, so that the risk of one person is divided among all the members and when the risk arises to any one member, that particular member is paid from that fund.
- 3. insurer to transfer the Bimiton risk exposures across Bimiton in – insurance is to transfer to the insurer. A fixed payment is made by the insurer in case of loss to the insured.
- 4. Insurance is a process – Insurance is also a process which is conducted in a predetermined manner. First the insured transfers his risk to the insurer in exchange for a fixed premium, then the insurance obligation provides protection against that risk.
- 5. Insurance a contract – Insurance having the property of legality, it is a valid contract. In this, an offer is made by the insured to the insurer and upon acceptance by the insurer, a valid contract is formed between the two in exchange for a fixed premium. In which on the occurrence of a certain event, the insurer gives an undertaking to cover the loss thereof.
- 6. Insurance is a cooperative approach – Insurance is based on the spirit of cooperative. Persons exposed to similar types of risks contribute to a certain fund, out of which the risk to any member is paid from that fund. Thus the spirit of “all for one and one for all is worked out.
- 7. Determining the risks of losses – In insurance, the risks cannot be eliminated, but the uncertainty of the risks is minimized and certain. The risks are transferred by the insured to the insurance company and the value of that risk is fixed with a fixed return / premium. That is, in lieu of fixed premium, uncertain losses are determined as the sum insured to be received by the insurance company. This amount is called the insurance claim amount.
- 8. Payment only on the occurrence of the event – In insurance, the payment is made only on the occurrence of the event. In life insurance, the occurrence of an event is certain, such as the death of a person, suffering from a particular disease, completion of the insurance period, then in such a situation, the insured must pay. But in normal insurance, payment will be made only after the occurrence of the event, otherwise the insured will not be considered liable for payment.
- 9. Assessment and Assessment of Risk – In insurance, the assessment of risk is done before the contract of insurance. The premium is predetermined on the basis of the amount of risk and the likelihood of the risk arising. In lieu of this fixed return/premium, a certain sum assured is paid on the occurrence of a certain risk.
- 10. Basis of payment – There is an investment element in life insurance, so on the death of the party or the completion of the term, a certain amount is paid to the insured. But in other insurance the payment will be made equal to the actual damage. This damage will be paid only in case of risk arising due to the insured reasons as per the contract and within the limit of the sum insured, no amount more than that will be paid.
- 11. Wide Scope – The scope of insurance has now become very wide. Now the scope of miscellaneous insurance has become very broad. In this, many types of insurance have been included like theft insurance, accident insurance, livestock insurance, crop insurance etc.
- 12. Institutional Structure – Big organizations all over the world are engaged in insurance work. In India Life Insurance Corporation, General Insurance Corporation and its four subsidiaries and many private companies are engaged in the work of insurance.
- 13. Insurance is not gambling – In insurance, compensation is compensated only when there is a normal loss equal to the actual loss, so it is wrong to compare insurance with gambling. In gambling, one party is in profit and the other party always remains in loss, but this does not happen in insurance.
- 14. Insurance is not a donation, it is a right – the right is obtained by contributing to the insurance by the insured, on the basis of the contractual relationship, the insurer pays the insured money / claim after a certain period of time in exchange for the fixed consideration (premium).
- 15. Measures to solve social problems – Many social problems prevailing in the society are solved through insurance because the uncertainties and risks of the society are reduced by insurance.
- 16. Insurance Law Compulsory – In the modern era, the field of insurance is expanding, along with it it is becoming the duty of the governments to make regulatory acts related to insurance. In India also, Acts have been made for life insurance, marine insurance, general insurance. Apart from this , the entire insurance business is regulated and controlled by the Insurance Control and Development Authority.
- 17. Essentials of Insurance Principles – It is necessary to have certain principles for an insurance contract. Among them insurable interest, principle of ultimate good faith, cooperation and potential etc. are the main principles. In the absence of the principle of insurable interest, insurance would be treated as gambling.
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