Q: What do you mean by insurance?

Ans: Insurance is a contract where one party (the insurer) agrees to compensate another party
(the insured) for potential losses or damages, in exchange for a fee called a premium. It's a
way to manage financial risk by transferring the potential cost of an uncertain event, like an
accident, illness, or natural disaster, to an insurance company. Insurance is a contract between
you (or a business) and an insurance company to help protect you and your loved ones from
financial loss due to an unexpected event, like an accident, illness, natural disaster, or other
unexpected circumstances. In the case of medical, dental or vision insurance, it can also help
keep you or your family healthy by offsetting —and sometimes covering — the cost of routine
care. The insurance contract itself is called a policy. The policy outlines who or what will be
covered under the contract, the circumstances for which payment will be issued by the
insurance company, who will receive the payment, and how much they will receive.

Q: What are the functions of insurance?

I. Primary Functions

• Provides risk coverage

• Provides certainty
• Risk sharing
• Provides financial protection
• Risk assessment and underwriting
• Risk classification and pricing
• Encourages risk control measures
• Promotes financial planning and budgeting
• Establishes contractual trust and legal framework

II. Secondary Functions

• Prevention of loss
• Provides capital for investment
• Improves business efficiency
• Encourages savings habit
• Promotes employment opportunities
• Provides actuarial data for research
• Stimulates innovation in financial products
• Stabilizes institutional finances through surplus
III. Other (Modern) Functions

• Helps economic development

• Encourages foreign trade and commerce
• Supports credit system
• Stabilizes business operations
• Promotes social security

Q: Types/classification of insurance?
Ans:
1. Personal Insurance
• Life Insurance: Provides financial support to your beneficiaries after your death.
• Personal Accident Insurance: Covers expenses related to accidental injury, disability, or
death.
• Health Insurance: Helps pay for medical treatments, hospital stays, and health-related
costs.

2. Property Insurance

• Marine Insurance: Protects ships, cargo, and maritime transport against risks like
storms or theft.
• Automobile Insurance: Covers damages or losses from car accidents, theft, or fire.
• Cattle Insurance: Compensates for the death or illness of farm animals.
• Crops Insurance: Provides financial relief if crops fail due to natural calamities or pests.
• Machinery Insurance: Covers breakdown or repair costs of industrial or agricultural
machinery.
• Theft Insurance: Protects against loss caused by burglary or theft of belongings.

3. Liability & Employee Insurance

• Liability Insurance: Pays for legal claims if you're held responsible for injury or damage
to others.
• Third Party Insurance: Specifically covers damages caused to other people or their
property.
• Employee Insurance: Offers protection to employees through health, life, or workplace
accident coverage.
• Motor Insurance: A general term for vehicle-related insurance including third-party and
own damage.
 • Reinsurance: Insurance for insurers — helps them manage large or unexpected risks by
spreading them.

4. Fidelity Insurance

• Fidelity Insurance: Covers losses from employee fraud, theft, or dishonesty.

• Credit Insurance: Protects lenders if borrowers fail to repay loans or debts.
• Privileged Insurance: Offers premium benefits and extended coverage to select or high-
value clients.
• Fiducial Insurance: Provides coverage for fiduciaries in case of errors, negligence, or
breach of duty.

Q: Historical background of insurance.

Ancient Origins
Insurance concepts began in ancient Babylon with the Code of Hammurabi (c. 1750 BCE),
introducing bottomry contracts where ship loans were forgiven if the vessel was lost at sea.
Similar risk-pooling practices appeared in India and China, and burial societies in Greece and
Rome paid members’ funeral costs from collective funds.
Medieval Developments
medieval Europe, craft guilds collected dues to compensate members for losses due to fire,
theft, or death, creating an early form of mutual insurance that supported tradesmen and their
families.
Early Modern Era
The Great Fire of London in 1666 spurred Nicholas Barbon to found the Fire Office (later
Phoenix) in 1680—the first property-damage insurer. At the same time, Edward Lloyd’s
coffeehouse became the hub for marine underwriting, evolving into Lloyd’s of London as
merchants shared sea-voyage risks underwritten by multiple investors.
Emergence of Life Insurance
By the late 1600s, life insurance took root in England, France, and Holland. In 1693, Edmund
Halley’s mortality tables enabled scientifically priced life annuities, ushering in actuarial
methods for underwriting human life risk.

Insurance in America
Franklin established the Philadelphia Contribution ship for fire insurance in 1752, the first
American insurer, and in 1759 the Presbyterian Ministers’ Fund issued the first U.S. life
insurance policies
Modern Expansion
During the 19th and 20th centuries, insurance diversified into health, automobile, liability, and
reinsurance lines. Advances in statistical analysis, regulatory frameworks, and global commerce
have shaped today’s multinational insurance industry.
Q: what is fire insurance?
Ans: Fire insurance is a form of property insurance that covers damage and losses caused by
fire. These protections are policies that financial institutions offer to the general public. Most
policies come with some form of fire protection, but homeowners may be able to purchase
additional coverage in case their property is lost or damaged because of fire. Purchasing
additional fire coverage helps to cover the cost of replacement, repair, or reconstruction of
property above the limit set by the property insurance policy. Fire insurance policies typically
contain general exclusions such as war, nuclear risks, and similar perils. Damage caused by a
fire set deliberately is also typically not covered.

Fire can damage:

• Buildings like homes, shops, and factories

• Furniture & appliances
• Machinery & equipment
• Stock & inventory
• Personal items like clothes, electronics, and documents
• Electrical systems and wiring

Q: Different types of fire insurance policy?

Types of Fire Insurance Policies:

• Valued Policy :You and the insurance company agree on a fixed amount. If your
property is destroyed by fire, you get that full amount.
• Specific (Unvalued) Policy: You insure each item for a set value, and if fire causes
damage, you're paid based on how much was actually lost—up to the amount you
insured.
• Floating Policy :Used for businesses with goods in different places. One policy covers all
your stock, no matter where it’s kept.
• Declaration Policy: You report how much stock you have every month, and your
premium is based on the average value over time.
• Adjustable Policy: You pay an estimated premium first. At the end of the year, you
adjust it based on the actual value of your goods.
 • Average Clause Policy: If you insure your property for less than it’s really worth, you get
a smaller payout (a percentage based on how much underinsured you are).
• Excess and First-Loss Policy: You choose a small, fixed amount that’s fully covered first.
Anything more is covered at a lower cost.
• Replacement Policy: Instead of money, the insurer gives you new items that are similar
to the ones lost in the fire.
• Consequential-Loss Policy (Loss-of-Profit) :Helps if your business stops making money
because of a fire—it pays for the income you lost or extra costs to restart.
• Sprinkler-Leakage Policy : Pays for damage caused if your fire sprinkler system
accidentally leaks water or breaks.

Q: write down the methods of claiming loss and settlement of fire insurance?

Ans:
1. Notify the Insurance Company: As soon as a fire happens, call or write to your insurer.
This lets them know something went wrong and starts your claim officially.
2. Estimate the Loss: Check what’s been damaged—like your building, furniture, machines,
or goods—and make a list. Take clear photos of the affected areas as proof.
3. Fill Out the Claim Form: The insurer gives you a form to complete. You write down
what happened, when, what was damaged, and roughly how much it all costs.
4. Submit Supporting Documents: You need to send copies of:
a. Your fire insurance policy
b. Police or fire brigade report (if available)
c. Proof of ownership (like bills or invoices)
d. Photos of damage
5. Surveyor Visit: The insurance company sends an expert (called a surveyor) to inspect
the damage in person. They check your claim and take notes.
6. Loss Assessment: The surveyor writes a report about how much damage there is and
how much the insurer should pay. This is based on what they see and your documents.
7. Settlement Offer: Based on everything, the company offers you a payout amount. This
might be the full amount or reduced if something wasn’t fully covered.
8. Negotiation (if needed): If you think the offer is too low, you can talk to the company
again. You may need to show more proof or explain your side better.
9. Acceptance & Payment: Once you agree with the offer, the insurer sends the payment—
usually by bank transfer or cheque.

[Link] Closure: The claim is closed officially. Keep all paperwork and emails safe in case
you need it later.
Q: Principles of insurance contract?

Ans:

1. Utmost Good Faith

a. Both the insurer and the insured must be completely honest with each other.
b. The insured must disclose all important facts that could affect the risk — like
health conditions, past claims, or the value of the property.
c. The insurer must clearly explain all policy terms, conditions, and exclusions.
d. If either side hides or misrepresents something, the contract may be canceled or
the claim rejected. This principle builds trust and helps avoid disputes later.
2. Insurable Interest
a. You can insure something only if losing it causes you financial loss — like your
own house or car, not someone else’s.
3. Indemnity
a. Insurance returns you to your original financial position after a loss — it doesn't
let you profit from the claim.
4. Contribution
a. If you have multiple policies on the same item, all insurers share the payout fairly
— you can’t collect the full amount from each.
5. Subrogation
a. After paying your claim, the insurer can recover the money from whoever caused
the damage — for example, a careless neighbor.
6. Proximate Cause
a. The insurer looks at the main reason the loss happened. If that cause is covered,
the claim is accepted.
7. Loss Minimization
a. You must try to reduce further damage after an incident — like calling the fire
brigade or protecting undamaged goods.