Basic understanding of insurance – hi guys weapon here we are here to discuss about insurance and we will discuss this topic in detail okay.

Now firstly let’s start off by understanding what is insurance? insurance is a contract between the insurer and the insured. The insured when you refer to insurer okay that refers to the company that’s selling you the insurance policy could be LIC could be Burleson life could be HDFC Standard Life could be any of those companies that is selling you the insurance policy

Basic understanding of insurance

the insured is you and I when we take up the policy we are corn as the insurer now why would anyone go about taking up an insurance policy you take up an insurance policy because you want to protect yourself or your family in case an eventualities were to occur what eventualities that’s not something.

but in case something were to happen an insurance company can compensate if this eventualities were to occur. now you have an offer and a consideration that goes about happening here, the offer is the insurance company will take care of you and your family if the eventualities were to occur however the consideration that you need to pay here is the premium each insurance policy has got its own premium depending upon the type of policy you have the price or the value of the premium in fact varies there are some policies wherein the premium is just a few hundred dollar per annum

General Principles

utmost faith in goods

a principle of utmost faith refers to the insurer and the insured must be clear on the terms and conditions within the contract now, let’s say I am taking up a health insurance and the insurance company is going to ask me questions like does your family suffer from any heart problems because usually things like heart problems are in fact genetic in nature now if this were to be true that is if my family were to be have a history of heart problems I am supposed to declare this in mind surance policy later on if I were to get into some medical emergency and I have a heart problem the insurance company may not compensate because I never mentioned these illnesses could come by any time in my life at the same time the insurance company as well should be clear upon the terms and conditions from their side now

when you refer to health insurance especially the insurance company will make it very clear what exactly they are going to compensate okay are they going to compensate you for the surgery or are they going to compensate you for everything else that includes in the hospitalization bill that is the medicine cost , the nursing charges, the consultation fee , all that are they going to take care of or are they going to take care of only the surgery a surgical cost so they need to be clear from their side and we need to be clear from our side as well

the next thing that you have is insurable interest now for example if I were to take up an insurance policy now okay and let’s say about three four months down the line, I lose interest in that policy however the three months when I have actually paid the premium I’m not going to get it back okay

I’m not going to get it back the reason is when I took up the insurance policy I had the interest to get the benefits of the policy later on if I change my mind or sir compare our circumstances were to change my interest or my opinion about that insurance policy the company is not going to refund any part of my premium so that’s what we refer to as insurable interest that is when you take up the policy you have the intention to get the benefits of the insurance contract


indemnity refers to replacing something which has been lost, of course this is not possible with life insurance because for obvious reasons you can’t replace someone who’s been dead okay however you could go about compensating them financially

in case of fire insurance indemnity becomes quite common because you have a type of insurance policy where if the property has been damaged the insurance company could replace the assets which have been damaged if even with auto insurances well in vacant insurance as well if you have a windshield or a door which has been cracked or dented you have the insurance company which will replace that with a new one so indemnity here refers to something which has been lost and or damaged and in this case it ends up getting replaced


subrogation refers to in some cases, especially in auto insurance. you come across situations where the insurance company is going to replace the part of the automobile which has been damaged now, let’s say you got into a car accident the door was tinted what the insurance company would do is they’ll replace the door with a new one for him now what’s going to happen to the old door the insurance company has compensated you by replacing the old door with a new

one what are they going to do with the old door is something which is up to them, let’s say they were to sell it for the scrap value you will not be able to get any benefit from back there because your benefit ended after they replace the old door with a new one you cannot get any further benefit from the sale of that old door and the salvage value of that old or the same thing you could say for even fire insurance if some property has been damaged in fire in a fire and this property however has got some salvage value the insurance company will keep that salvage value they will compensate you by replacing what has been damaged however they will not give you any part of the compensation of the salvage value that okay


mitigation here refers to minimizing the risk from your side okay minimizing the risk, from your side the insurance company expects you to minimize risk from your side say for example if you take up a health insurance policy it’s not advice that you immediately take up smoking and drinking because this is going to affect you in the long term and this could in fact pose some serious health problems later on so you should protect yourself from any problems that could happen this could even mean if you are traveling in a two wheeler you are required to even wear a helmet when you are riding your bike even that is in fact a part of mitigation then Causa Proxima refers to the nearest possible cause insurance companies don’t really look into the details of what may have happened but there’s a car accident the policy would cover only a car accident they don’t release consider okay what is the real reason why it actually happened was it because they didn’t see a pothole in the road they suddenly lost control that’s something which they don’t really look at it all they would look at is okay the nearest possible costs if you refer to illnesses especially if the illness is terminal they would just categorize it as a terminal illness they would really not get into the details of how did this person end up getting this and what he could have done in fact to avoid things like this

Causa Proxima

Causa Proxima refers to the nearest possible cause now this question could in fact come for ten marks so please know that this topic indeed Amy now coming to the various types of insurance policies they could ask you each of them for an N mark question or I to be as brief as possible in this because I need to cover a large amount of information in a short amount of time just to make the topic easier for you all so firstly life insurance a whole life policy in case of a whole life policy the insurance plan
you will be able to get compensation upon the insured person’s death

Okay let’s say in my case if I happen to die at the mortality rate of 60 my family is able to get it as soon as I happen to die so that’s a case of a whole life policy endowment policy refers to a policy which has a particular number of years and the eventualities should occur in that particular number of years so that’s what you would refer to as an endowment policy joint life policy is a type of insurance policy which is taken by two or more persons let’s say a father who take a joint life policy for his wife and for his child him and then you have an annuity policy

the word annuity if you’re a mathematics student and UT here refers to equal amounts of money being given back in equal intervals of time there are many insurance policies which they also refer to as a money back policy or a cash back policy. let’s say you make the insurance policy we need the investment today around five years from now and in intervals of five years a certain amount of money is in fact returns back to your account it’s a form of savings for many people so that’s what you refer to as an annuity policy dumb assurance.

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