Insurance

Study
Materials
(Compact
Version)
BBA
8th
Semester
Preparation

Non-Life
Life
Feature (General)
Insurance
Insurance

Property,
Subject assets, or
Human life.
Matter legal
liabilities.

Protection Protection
against the against
risk of financial loss
Objective
death and from specific
a means of damage or
investment. theft.

Long-term
Short-term
(usually 10
(typically 1
Duration to 30 years
year,
or whole
renewable).
life).

Not Strictly
Principle applicable; applicable;
of human life compensates
Indemnity cannot be for actual
valued. loss only.

Paid only if a
Paid on
specific
Payment death or
insured
of Claim maturity of
event (loss)
the policy.
occurs.

Paid
Usually paid
throughout
in a single
Premium the term
lump sum at
Payment (monthly,
the start of
annually,
the term.
etc.).

Must exist
Must exist
both at the
Insurable at the time
time of policy
Interest the policy
and at the
is taken.
time of loss.

Policies
often have Policies have
Surrender a cash no surrender
Value surrender or maturity
or paid-up value.
value.

Commercial
Property
Insurance
Protects
a
business's
physical
assets
—such
as
buildings,
equipment,
inventory,
and
furniture
—from
losses
caused
by
perils
like
fire,
theft,
or
natural
disasters.

Liability
Insurance
Protects
a
business
against
financial
losses
resulting
from
legal
claims
or
lawsuits
for
bodily
injury,
property
damage,
or
personal
injury
caused
to third
parties
during
business
operations.

Fire
Insurance
A
contract
that
provides
financial
compensation
for
damage
or loss
to
property
caused
by
accidental
fire,
lightning,
or
explosion.
Uses
of
Fire
Insurance
• Asset
Protection:
Covers
the
cost
of
repairing
or
replacing
buildings,
machinery,
and
stock.
• Business
Continuity:
Provides
funds
to
resume
operations
quickly
after
fire
damage.
• Risk
Transfer:
Shifts
the
heavy
financial
burden
of
fire-
related
disasters
to
an
insurance
provider.
• Lending
Requirement:
Often
mandatory
for
securing
mortgages
or
business
loans
against
property.
• Third-
Party
Coverage:
Can
cover
damage
to
neighboring
properties
or
contents
if
included
in
the
policy.
TYPES
OF
POLICY
• Valued
Policy:
Specifies
a
fixed
sum
to
be
paid
in
case
of
total
loss,
regardless
of
the
actual
market
value
at
the
time
of
destruction.
• Specific
Policy:
Covers
a
property
for a
specific
amount;
the
insurer
pays
the
full
loss
up
to
that
stated
limit
regardless
of
the
property's
total
value.
• Average
Policy:
Includes
an
"average
clause"
where
if
the
property
is
underinsured,
the
insurer
pays
only
a
proportional
share
 of
the
loss.
• Replacement
Policy:
Covers
the
cost
of
replacing
damaged
property
with
new
items
of
the
same
kind,
without
deducting
for
depreciation.
• Comprehensive
Insurance
Policy:
Provides
broad
coverage
against
a
wide
range
of
perils,
including
fire,
theft,
explosion,
and
third-
party
risks.
• Sprinkler
Leakage
Policy:
Covers
damage
to
property
caused
by
the
accidental
discharge
or
leakage
of
water
from
automatic
sprinkler
systems.
• Floating
Policy:
Covers
goods
belonging
to
the
same
owner
that
 are
located
at
different
locations
or
transit
points
under
a
single
sum.
• Excess
Policy:
Provides
coverage
only
for
losses
that
exceed
the
limits
of
an
underlying
primary
insurance
policy.
• Declaration
Policy:
Allows
the
insured
to
declare
the
varying
value
of
stock
periodically,
with
the
final
premium
based
on
the
average
of
these
declarations.
• Adjustable
Policy:
A
policy
where
the
premium
or
coverage
amount
is
adjusted
periodically
based
on
changes
in
the
value
of
 the
insured
property.
• Maximum
Value
with
Discount
Policy:
Covers
the
maximum
potential
value
of
assets,
providing
a
premium
discount
for
maintaining
high
safety
standards.
• Consequential
Loss
Policy:
Reimburses
for
indirect
losses,
such
as
lost
profits
or
standing
charges,
resulting
from
a
fire
that
disrupts
business.
• Ordinary
Fire
Insurance
Policy:
A
standard
contract
covering
damage
caused
specifically
by
fire
and
lightning
to
specified
property.
• Specific
Perils
Insurance
Policy:
Covers
losses
resulting
only
from
named
 risks
(perils)
explicitly
listed
in
the
policy
document.

Rate
Fixation
in
Fire
Insurance
The
process
of
calculating
the
premium
rate
based
on the
level of
risk to
ensure
it
covers
potential
claims
and
costs.

Factors
Influencing
Rate
Fixation
• Construction:
Building
materials
used
(e.g.,
flammable
vs.
fire-
resistant).
• Occupancy:
How
the
building
is
used
(residential
vs.
industrial).
• Location:
Proximity
to
fire
hazards
or
fire
stations.
• Protection:
Presence
of
fire
alarms,
sprinklers,
or
extinguishers.
 • Loss
History:
Frequency
and
severity
of
previous
fire
claims.

Methods
of
Rate
Fixation
• Class
Rating:
Applying
a
uniform
rate
to
similar
groups
of
risks.
• Schedule
Rating:
Adjusting
a
base
rate
for
specific
safety
features
or
hazards.
• Experience
Rating:
Adjusting
rates
based
on
the
individual's
past
claim
record.
• Merit
Rating:
Offering
discounts
for
implementing
superior
fire
prevention
measures.

Claim
Settlement
Process
in
Fire
Insurance
• Intimation
of
Loss:
The
policyholder
must
 immediately
notify
the
insurer
about
the
fire
incident
via
phone,
email,
or in
writing.
• Submission
of
Claim
Form:
The
insured
completes
and
submits
a
formal
claim
form
providing
details
of
the
cause,
extent
of
damage,
and
estimated
loss
value.
• Survey
and
Assessment:
For
significant
losses,
the
insurer
appoints
an
independent
surveyor
to
inspect
the
site,
verify
the
cause,
and
quantify
the
actual
damage.
• Verification
of
Policy
Conditions:
The
insurer
checks
if
the
policy
was
 active,
if
premiums
were
paid,
and
if
the
loss
is
covered
under
the
specific
terms
and
perils.
• Determination
of
Indemnity:
The
final
claim
amount
is
calculated
based
on
the
actual
financial
loss,
applying
the
principle
of
indemnity
(no
profit)
and
any
average
clauses.
• Payment
of
Claims:
Once
the
amount
is
agreed
upon
and
discharge
vouchers
are
signed,
the
insurer
issues
the
payment
to
the
policyholder.

Marine
Insurance
A
contract
where
the
insurer
compensates
the
insured
against
losses
incidental
to
marine
adventure,
covering
ships,
cargo,
and
freight
against
perils
like
sinking,
collision,
or
piracy.

Types
of
Marine
Insurance
• Hull
Insurance:
Covers
physical
damage
to
the
ship
or
vessel
and
its
machinery.
• Cargo
Insurance:
Protects
the
goods
being
transported
by
sea
against
damage
or
theft.
• Freight
Insurance:
Protects
the
shipping
company
against
the
loss
of
shipping
charges
if
the
cargo
is
lost
or
damaged.
• Liability
Insurance:
 Covers
legal
compensation
for
third-
party
injuries
or
property
damage
(e.g.,
collisions).

Premium
Calculation
The
premium
is
calculated
by
multiplying
the
Sum
Insured
by a
specific
Rate
of
Premium
(expressed
as a
percentage).
Factors
Affecting
Premium:
* Type
of
Vessel:
Age,
tonnage,
and
condition
of the
ship. *
Nature
of
Cargo:
Fragility,
perishability,
or
hazardous
nature
of
goods.
*
Voyage
Route:
Safety
of the
route,
weather
conditions,
and
political
stability
of the
region.
*
Coverage
Scope:
Extent
of risks
covered
(e.g.,
Total
Loss
Only
vs. All
Risks).
*
Claims
History:
The
past
record
of
losses
by the
policyholder.

Payment
of
Claims
Process
• Notice
of
Loss:
Immediate
notification
to
the
insurer
or
their
agent
upon
discovery
of
damage.
• Survey:
Appointment
of a
surveyor
to
inspect
the
cargo
or
ship
and
assess
the
extent
of
the
loss.
• Claim
Documentation:
Submission
of
documents
(Bill
of
Lading,
Invoice,
Policy,
Survey
Report).
• Assessment:
Insurer
verifies
the
claim
against
policy
terms
 and
the
principle
of
indemnity.
• Settlement:
Approval
of
the
claim
and
issuance
of
payment
to
the
insured.

TYPES
OF
MARINE
INSURANCE
POLICIES
• Voyage
Policy:
Covers
the
subject
matter
(ship
or
cargo)
for a
specific
journey
from
one
port
to
another,
regardless
of
the
time
taken.
• Time
Policy:
Covers
the
subject
matter
for a
specific
period
(usually
not
exceeding
one
year),
regardless
of
the
number
of
voyages
made.
• Mixed
Policy:
Combines
both
voyage
 and
time
elements,
covering
a
ship
for a
specific
journey
during
a
specific
period.
• Value
Policy:
Specifies
the
agreed-
upon
value
of
the
subject
matter
at
the
time
of
insurance,
which
is
paid
in
full
in
the
event
of a
total
loss.
• Unvalued
(Open)
Policy:
Does
not
specify
the
value
of
the
subject
matter;
the
value
is
determined
only
after
a
loss
occurs,
based
on
market
value.
• Floating
Policy:
Describes
the
general
terms
but
leaves
 the
ship
name
and
other
details
to
be
defined
by
subsequent
declarations
as
shipments
are
made.
• Wager
Policy:
A
policy
where
the
insured
has
no
legal
insurable
interest;
the
insurer
agrees
to
pay
based
on
the
policy
document
alone
(usually
legally
void).
• Port
Risk
Policy:
Covers
the
ship
only
while
it is
stationed
in a
particular
port.
• Fleet
Policy:
Covers
several
ships
belonging
to
the
same
owner
under
a
single
insurance
contract.
• Composite
Policy:
A
 policy
underwritten
by
multiple
insurers,
where
each
insurer
is
responsible
for a
specific
share
of
the
total
risk.

Cost
of
Auto
Insurance
The
cost of
auto
insurance
is the
premium
paid
for
coverage,
which
varies
based
on the
level of
protection
(minimum
liability
vs. full
coverage).
As of
2026,
the
national
average
for full
coverage
is
approximately
$2,300
to
$2,700
per
year,
or
roughly
$200
per
month.

Major
Rating
Factors
• Territories
(Location):
Rates
are
higher
in
urban
areas
 or
ZIP
codes
with
high
rates
of
accidents,
theft,
or
litigation.
• Age
and
Gender:
Young,
inexperienced
drivers
(especially
males
under
25)
pay
higher
premiums
due
to
higher
statistical
risk.
• Use
of
Auto:
Higher
annual
mileage
or
using
the
vehicle
for
business/
commuting
increases
the
likelihood
of
an
accident
and
the
premium.
• Driver
Education:
Completing
approved
defensive
driving
or
driver
training
courses
can
lower
rates.
• Good
Student
Discounts:
Full-
time
students
with
a
high
 GPA
(usually
a
"B"
average
or
higher)
often
qualify
for
reduced
premiums.
• Number
and
Type
of
Cars:
Insuring
multiple
vehicles
typically
earns
a
discount.
The
car’s
value,
safety
ratings,
repair
costs,
and
engine
performance
(e.g.,
sports
cars
vs.
sedans)
also
heavily
influence
the
rate.
• Driving
Record:
A
clean
history
without
at-
fault
accidents
or
traffic
violations
leads
to
the
lowest
rates.
• Credit-
Based
Insurance
Score:
In
many
regions,
insurers
use
credit
history
to
 predict
the
likelihood
of
filing
a
claim.

Miscellaneous
Insurance
Miscellaneous
Insurance
refers
to a
broad
category
of
general
insurance
that
includes
all
types
of
policies
other
than
Life,
Fire,
and
Marine
insurance.
It is
designed
to
cover
unique
or
specific
risks
that do
not fit
into the
three
traditional
categories.

Types
of
Miscellaneous
Insurance
These
are
typically
grouped
into
three
categories:
Person,
Property,
and
Liability.
*
Burglary
Insurance:
Covers
loss or
damage
to
property
caused
by theft
following
"forcible
and
violent
entry"
into the
premises.
*
Fidelity
Guarantee
Insurance:
Protects
an
employer
against
financial
loss
caused
by the
dishonesty,
fraud,
or
forgery
of
employees.
*
Money
Insurance:
Covers
the
loss of
cash,
cheques,
or
drafts
while in
transit
between
a bank
and
the
business,
or
while
kept in
a safe.
*
Personal
Accident
Insurance:
Provides
compensation
in the
event
of
death
or
bodily
injury
(disability)
resulting
solely
from a
violent,
external,
and
visible
accident.
*
Professional
Indemnity:
Protects
professionals
(like
doctors,
lawyers,
or
engineers)
against
legal
claims
arising
from
errors
or
omissions
in their
work. *
Plate
Glass
Insurance:
Covers
the
accidental
breakage
of
expensive
glass
installations
in
storefronts
or
office
buildings.
*
Baggage/
Luggage
Insurance:
Covers
the
loss or
damage
of
personal
effects
during
business
or
holiday
travel.
*
Livestock/
Cattle
Insurance:
Provides
protection
against
the
death
of
animals
due to
disease
or
accidents
(common
in rural
and
agricultural
sectors).

Premium
and
Fees
Types
In
miscellaneous
insurance,
premiums
are
calculated
based
on the
specific
risk
level of
the
activity
or
asset.
Common
types
of fees
and
premium
structures
include:
* Fixed
Premium:
A set
amount
paid at
the
start
for
risks
that
are
stable
and
easy to
quantify
(e.g.,
Personal
Accident).
*
Adjustable
Premium:
Used
for
policies
like
"Money-
in-
Transit"
where
the
final
premium
is
adjusted
at the
end of
the
year
based
on the
actual
total
volume
of
money
moved.
*
Declaration
Fees:
In
policies
like
Burglary
insurance,
the
insured
pays
based
on
periodic
declarations
of the
value
of
stock. *
Short-
Period
Scales:
Higher
rates
applied
if the
policy
is
taken
for a
very
short
duration
(less
than a
year). *
Group
Discounts:
Lower
per-
person
fees
offered
when
insuring
a large
group
(e.g.,
Group
Personal
Accident
for a
company).

Workers'
Compensation
Workers'
Compensation
is a
form of
insurance
providing
wage
replacement
and
medical
benefits
to
employees
injured
in the
course
of
employment,
in
exchange
for the
employee's
relinquishment
of the
right to
sue
their
employer
for
negligence.

Objectives
• Income
Replacement:
Provides
financial
support
to
workers
unable
to
earn
a
living
due
to
work-
related
injuries.
• Medical
Care:
Ensures
injured
workers
receive
necessary
medical
treatment
without
out-
of-
pocket
costs.
• Rehabilitation:
Facilitates
the
worker's
return
to
the
workforce
through
physical
or
vocational
therapy.
• Liability
Protection:
Protects
employers
from
costly
lawsuits
by
making
workers'
comp
the
"exclusive
remedy"
for
workplace
injuries.
• Safety
Promotion:
Encourages
employers
to
maintain
 safe
working
environments
to
keep
insurance
premiums
low.

Coverage
and
Eligibility
• Employment
Status:
You
must
be a
formal
employee.
Independent
contractors
and
volunteers
are
generally
excluded.
• Work-
Relatedness:
The
injury
or
illness
must
have
occurred
"arising
out
of
and
in
the
course
of
employment."
This
includes
off-
site
travel
for
business
but
excludes
the
normal
commute.
• No-
Fault
System:
Benefits
are
paid
regardless
of
who
was
at
fault
for
the
accident,
provided
it
 wasn't
caused
by
the
employee's
intoxication
or
intentional
self-
harm.

Compensation
Benefits
• Medical
Benefits:
Covers
all
"reasonable
and
necessary"
medical
expenses,
including
surgeries,
hospital
stays,
and
medications.
• Disability
Benefits:
• Temporary
Total
Disability
(TTD):
Payments
while
the
worker
is
completely
unable
to
work
but
expected
to
recover.
• Permanent
Partial
Disability
(PPD):
Compensation
for a
permanent
impairment
(e.g.,
loss
of a
finger)
that
doesn't
prevent
all
work.
• Permanent
Total
Disability
(PTD):
Payments
for
injuries
that
permanently
 prevent
any
gainful
employment.
• Vocational
Rehabilitation:
Training
for a
new
role
if
the
worker
can
no
longer
perform
their
previous
job
duties.
• Death
Benefits:
Paid
to
the
surviving
dependents
(spouse
and
children)
if a
workplace
injury
or
illness
results
in
death,
typically
including
funeral
expenses.

Unemployment
Insurance
(UI)
A
state-
federal
program
that
provides
temporary
financial
assistance
to
workers
who
have
lost
their
jobs
through
no fault
of their
own.

Coverage
• Employees:
Most
workers
in
 the
private
sector,
non-
profits,
and
government
agencies
are
covered.
• Excluded:
Typically
excludes
self-
employed
individuals,
independent
contractors,
and
freelancers
(though
some
specific
2026
regulations
in
certain
regions
have
begun
expanding
coverage
for
"foreign
professionals").

Eligibility
Requirements
To
qualify
for
benefits
in
2026,
you
generally
must
meet
three
criteria:
*
Involuntary
Separation:
You
must
have
lost
your
job due
to a
layoff,
downsizing,
or "lack
of
work,"
rather
than
being
fired
for
misconduct
or
quitting
without
good
cause.
* Work
History
&
Earnings:
You
must
have
earned
a
minimum
amount
of
wages
or
worked
a set
number
of
hours
(e.g.,
at least
$310/
week
for 20+
weeks
in
some
states)
during
a
"base
year." *
Availability:
You
must
be
physically
able to
work,
available
to
accept
a
suitable
job,
and
actively
seeking
employment
(often
requiring
a
weekly
record
of job
applications).

Benefits
• Weekly
Payments:
Usually
calculated
as a
percentage
of
your
previous
earnings
(often
around
40%
 to
60%
of
your
average
weekly
wage).
• Duration:
Typically
lasts
up
to
26
weeks
in a
single
year,
though
this
can
be
extended
during
periods
of
high
unemployment.
• Capped
Rates:
Benefits
have
a
maximum
weekly
limit
based
on
state
or
regional
laws.
• Additional
Services:
Most
programs
also
provide
access
to
job
placement
services,
career
counseling,
and
vocational
training
allowances.

OASDI
Benefits
(Social
Security)
The
Old-
Age,
Survivors,
and
Disability
Insurance
program
provides
monthly
financial
support
in
three
main
areas:
*
Retirement
Benefits
(Old-
Age):
Monthly
payments
to
workers
(typically
age 62
or
older)
who
have
earned
enough
work
credits.
Spouses
and
some
divorced
spouses
may
also be
eligible.
*
Survivors
Benefits:
Payments
made
to
widows,
widowers,
and
dependent
children
of a
deceased
worker
who
was
eligible
for
Social
Security.
*
Disability
Benefits
(SSDI):
Monthly
support
for
workers
who
have a
physical
or
mental
impairment
that
prevents
"substantial
gainful
activity"
for at
least a
year or
is
expected
to
result
in
death.

Medicare
Benefits
Medicare
is a
federal
health
insurance
program
primarily
for
people
age 65
or
older
and
younger
people
with
specific
disabilities.
It is
divided
into
four
parts: *
Part A
(Hospital
Insurance):
Covers
inpatient
hospital
stays,
skilled
nursing
facility
care,
hospice,
and
some
home
health
care. In
2026,
the
deductible
for
hospital
stays is
$1,736.
* Part
B
(Medical
Insurance):
Covers
doctor
services,
outpatient
care,
medical
supplies
(like
wheelchairs),
and
preventive
services.
The
2026
standard
monthly
premium
is
$202.90.
* Part
C
(Medicare
Advantage):
An
alternative
to
Original
Medicare
(A & B)
offered
by
private
companies.
These
often
include
"extra"
benefits
like
vision,
dental,
hearing,
and
fitness
programs.
* Part
D
(Prescription
Drug
Coverage):
Helps
cover
the
cost of
prescription
drugs.
These
plans
are run
by
private
insurance
companies
following
federal
rules.

Compulsory
Auto
Third-
Party
Insurance
• Definition:
A
mandatory
policy
that
covers
legal
liability
for
injury,
death,
or
 property
damage
caused
to a
third
party
by
the
insured
vehicle.
It
does
not
cover
the
insured's
own
vehicle.
• Legal
Requirements:
Mandated
by
national
laws
(e.g.,
the
Motor
Vehicles
Act).
Driving
without
it is
a
legal
offense
punishable
by
fines
or
license
suspension.
• Importance:
Ensures
accident
victims
receive
compensation
regardless
of
the
driver's
financial
status
and
protects
the
driver
from
massive
out-
of-
pocket
legal
expenses.

Social
Insurance
• Definition:
A
government-
run
system
providing
 financial
aid
to
individuals
based
on
specific
criteria
like
employment,
contributions,
or
age.
• Legal
Requirements:
Usually
compulsory
for
employees
and
employers;
contributions
are
deducted
directly
from
wages
and
managed
in a
common
public
fund.
• Importance:
Provides
a
safety
net
against
economic
risks
(unemployment,
sickness,
or
poverty)
and
ensures
social
stability
by
redistributing
resources
to
the
vulnerable.

Old-
Age,
Survivors,
and
Disability
Insurance
(OASDI)
• Definition:
A
federal
program
(often
called
Social
Security)
providing
 monthly
benefits
to
retired
workers,
their
families,
survivors
of
deceased
workers,
and
the
disabled.
• Legal
Requirements:
Mandatory
payroll
tax
contributions
from
both
employees
and
employers.
Eligibility
depends
on
earning
a
specific
number
of
"credits"
through
years
of
work.
• Importance:
*
Old-
Age:
Acts
as a
primary
source
of
income
for
retirees.
• Survivors:
Protects
families
if
the
household
breadwinner
passes
away.
• Disability:
Provides
vital
financial
support
for
those
unable
to
work
due
to
long-
term
medical
conditions.