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Define Insurance. Discuss its essential features / Why are insurance contract called contract
Insurance is a contract in which one party (the "insured") pays money (called a premium) and the other
party promises to reimburse the first for certain types of losses (illness, property damage, or death) if
they occur. Insurance can be defined as a contract in the form of a policy. This policy covers the monetary
risks of an individual due to unpredictable contingencies. The insured is the policyholder.
The insurer is the insurance-providing company/the insurance carrier/the underwriter. They provide
coverage or reimbursement to the policyholder. The insurer assures that it shall cover the policyholder‘s
losses subject to certain terms and conditions. Premium payment decides the assured sum for insurance
coverage or ‗policy limit‘. In simple words, insurance is a risk transfer mechanism, where you transfer
your risk to the insurance company and get the cover for financial loss that you may face due to
unforeseen events.
The essential features of Insurance are as follows:-
1. It is contract for compensating losses. It is future contract for compensating losses.
2. It is a kind of risk management plan to use an insurance policy as a hedge against an uncertain
loss.
3. Insurance coverage does not mitigate the magnitude of loss one may face. It only assures that
the loss is shared and distributed among multiple people.
4. Premium is charged for insurance contract.
5. It is contract of good faith.
6. It is contract for mutual benefit.
7. Various clients of an insurance company pool in their risks. Hence, they pay the premiums
together. So when one or a few incur a financial loss, the claimed money is given out of this
accumulated fund. This makes each client bear a nominal fee.
8. The payment of insured as per terms of agreement in the event of loss.
9. It is an instrument of distributing the loss of few among many.
10. The occurrence of the loss must be accidental.
11. Insurance must be consistent with public policy.
12. Insurance coverage can be provided for medical expenses, vehicle damage, property loss/damage,
etc. depending on the type of insurance.
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Insurance is a contract of Indemnity. Illustrate the statement giving reasons
Indemnity means guarantee or assurance to put the insured in the same position in which he was
immediately prior to the happening of the uncertain event. The insurer undertakes to make good the loss.
Under this the insurer agreed to compensate the insured for the actual loss suffered.
Indemnity means security, protection and compensation given against damage, loss or injury. According
to the principle of indemnity, an insurance contract is signed only for getting protection against
unpredicted financial losses arising due to future uncertainties. Insurance contract is not made for making
profit as its sole purpose is to give compensation in case of any damage or loss.
In an insurance contract, the amount of compensations paid is in proportion to the incurred losses. The
amount of compensations is limited to the amount assured or the actual losses, whichever is less. The
compensation must not be less or more than the actual damage. Compensation is not paid if the specified
loss does not happen due to a particular reason during a specific time period. Thus, insurance is only for
giving protection against losses and not for making profit.
However, in case of life insurance, the principle of indemnity does not apply because the value of human
life cannot be measured in terms of money. The principle of indemnity is applicable to fire, marine and
other general insurance. Therefore it is rightly stated that Indemnity is the Controlling in insurance
law, but all insurance contracts are not perfect Contracts of indemnity‘‘ as because it is clearly observable
that although life insurance contracts are contracts of insurance but they are not strictly speaking perfect
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Contracts of indemnity.
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What are the Principles of Insurance?
● Utmost Good Faith
● Proximate Cause
● Insurance Interest
● Indemnity
● Subrogation
● Contribution
● Loss Minimization
Let’s learn about each of the above 7 principles of insurance in detail with the help of relevant examples.
As we have learnt, the insurance is a contract wherein there are two parties involved, the insurer and
the insured. Hence, there are certain insurance principles that are bound to the contract to ensure its
validity. It is important for both the parties to abide by the following 7 principles of insurance:

Principle of Utmost Good Faith : It is the fundamental principle of insurance in which both the parties should
act in good faith towards each other. Both the insurer and the insured must provide clear and concise
information with regards to the terms and conditions of the insurance policy.
Example of Utmost Good Faith Principle: Mr. X took a health insurance policy. However, at the time of taking
the policy, he was a chainsmoker, but did not inform the insurance company. In this situation, the insurance
company does not become liable to bear the financial burden as Mr. X hid the fact that he was a chainsmoker.

Principle of Proximate Cause : It is also called ‘Causa Proxima’ or the nearest cause. Proximate cause implies
when the loss is the result of two or more causes. The insurance provider shall investigate the nearest cause of
the loss to the property. If the proximate cause is the one in which the property is insured, then the insurer is
liable to pay the compensation. However, if it is not the cause to which the property is insured, then the
insurer is not liable to pay the compensation.
Example of Proximate Cause Principle: A wall of a building was damaged due to fire and the payable as the
damage to the wall is considered as an inevitable cause of fire.

Principle of Insurable Interest: benefit to the insured, as well as, lead to a financial loss in case there is any
damage or destruction caused to it.
Example of Insurable Interest Principle: The owner of a stationery shop has an insurable interest in the shop
as he is earning money from it. However, if he sells or leases his shop, he will no longer have an insurable
interest in it.
Principle of Indemnity : It implies that the insurance is done only to cover the loss, hence the insured should
not derive any profit from the insurance contract. The insured should only be compensated to the extent of
the actual loss incurred and not the amount exceeding the loss. The principle of indemnity aims to set back the
insured at the same financial position he was before incurring the loss. Principle of indemnity strictly implies
for property insurance and is not applicable to life insurance.
Example of Indemnity Principle: The owner of a residential building takes an insurance contract to recover the
costs for any loss or damage to the property in the future. If the building faces any kind of structural damage
due to fire, the insurance company shall make an indemnifying compensation to the owner for the costs to
repair the building. The compensation is the exact amount spent on the repair or reconstruction of the
damaged areas by the authorized contractors.
Principle of Subrogation: Subrogation refers to the situation when one party stands on behalf of another.
Under the principle of subrogation, once the insured is compensated for the losses incurred to him for the
insured property, the rights of the ownership of such property transfers to the insurer. Thus, subrogation
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gives the right to the insurer to claim the amount of loss from the third-party.
Example of Subrogation Principle : Mr. X sustains injuries in a road accident due to irresponsible driving of a
third party. The insurer shall compensate Mr. X for the losses incurred as well as sue the third party for the
recovery of the compensated amount.
Principle of Contribution : It applies when the insured entity takes more than one insurance policy for one and
the same property. Principle of contribution is similar to the principle of indemnity, such that the insured shall
not be able to derive profits through an insurance claim on one insured property by opting for different
policies and/ or companies.
Example of Contribution Principle : The owner of a property worth INR 5 lakhs insures it for INR 1 lakhs from
Insurer A and INR 3 lakh from Insurer B. In case of any damage to the property, the owner can claim the full
amount of INR 3 lakh from Insurer B but not from the other. Besides, Insurer B can claim the proportional
amount reimbursed value from Insurer A.
Principle of Loss Minimization: As per the principle of loss minimization, it is obligatory for the insured to take
necessary actions to minimize the loss to the insured property. The principle of loss minimization states that
the owner cannot be irresponsible or negligent about their insured property. should not take it easy and allow
the fire to engulf the property knowing that it is ensured and that the insurer shall pay for it.
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Why are insurance contract called contract of adhesion
Insurance contracts are typically good examples of classic adhesion contracts. Virtually every insurance policy
agreement is prepared solely by the insurance company. These agreements are lengthy, and the insured party,
particularly an individual, has little ability to change any of the terms.
When purchasing insurance, the insured party will have options to set limits and certain other terms of
coverage, such as deductibles. However, the insurance company is in the driver’s seat when issuing the policy.
Almost all of the terms of a typical insurance policy are boilerplate, with no variance between policyholders.
Adhesion insurance contracts are used for efficiency. At least from the insurance industry’s perspective, it
would be very costly and unmanageable to negotiate the specific terms of a policy with every new insurance
applicant.
Characteristics of an adhesion contract
Several characteristics are almost universal when looking at what is common to adhesion in insurance.
Knowing something about these characteristics may help you understand when you are participating in one so
that you can protect your interests as much as possible. Consider the following qualities:
 Identical language throughout: A contract of adhesion insurance will likely feature the same language
wherever it is used. In other words, the policy contract you sign is likely the same as the one thousands
of others have signed. Although used commonly by insurers, you are also likely to find these contacts in
cases such as automobile lease agreements, rental or mortgage contracts and with consumer products
like cell phones.
 Unequal bargaining power: In an adhesion contract, one party — normally the business or corporate
party — has a great deal of power, while the other party — the consumer in most cases — has little
ability to add, subtract or change any elements of the contract.
 Benefits are one-sided: These contracts will generally favor the corporate party at the expense of the
weaker party. Yes, the consumer is likely to receive something, such as a cell phone or insurance policy,
as part of the contract. Still, the more powerful partner — in these cases, the cell phone company or
insurer — dictates the rules and stipulations that the contract enforces. An example might be a contract
with specific language regarding dispute regulation. Generally, this language will favor the rights of the
more powerful corporate party and make it more likely that the dispute will be decided in its favor.
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Marine Insurance
Marine Insurance is one of the oldest contracts of insurance which has been applied by the law, it has
been originated from the Greek and Roman marine Insurance Law. Marine insurance is understood to be
a contract between the insurer and the insured, in which the insurer agrees to pay a fixed or agreed
amount of money to be insured against losses.
Marine insurance is one of the most important concepts of insuring a party from damage suffered by the
loss or destruction of goods or the instrument of transportation. The contract of such insurance should
comply with all the essentials of a standard contract and should not be a void contract. The main
essentials of a valid contract according to the India Contract Act, 1872 is that a contract should consist of
an offer, which is the proposal, an acceptance, which is a go ahead by acceptor, a consideration, a
premium payable on the completion of the contract.
The scope of marine insurance is very wide as it covers not only the goods that are at risk during
transportation but covers almost every risk that could occur in the process or transportation weather it is
the goods or the instrument of transport. Weather it is in land or in the ocean or air, marine insurance will
cover the loss and damage if the goods, freight, merchandise or the instrument of transport face some
perils during transit.
The concept of marine insurance as defined by the marine insurance act covers all man-made calamities
or perils which include, theft, robbery, piracy, arson, etc. This insurance also covers for natural calamities
such as earthquakes, lightning, cyclones, etc. the concept of this insurance also includes the stranding or
sinking of ships as in many circumstances there is no return of the ship and goods which have been sent
out.
Marine Insurance covers the risks associated with marine adventures. For example, transportation of
cargo through ships. The consignment is exposed to the perils associated with transportation through sea
and hence requires an insurance cover against sea perils such as tempest which could result in damage to
the ship as well as the goods consigned.
However, as per Section 4 of the Act, a Marine insurance can cover the land as well as the sea risks
associated with the goods transported. However, such land risks must be incidental to the sea voyage. For
example, if goods will have to be consigned from Delhi to Nagpur to Dubai. The nearest port is Mumbai.
Therefore the goods are sent by truck from Nagpur to Mumbai and from Mumbai to Dubai through a
ship. An insurance policy can be considered for coverage of Mixed Land and Sea Risks.
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Marine Warranty
A Warranty means a stipulation or term, the breach of which entitles the insures to avoid the policy
altogether and this is so even though the breach arises through circumstances beyond the control of the
warrantor. The following types of warranties are recognized under the Marine Insurance Act:-
a) Warranty of neutrality - where insurable property, whether ship or goods, is expressly warranted
neutral, there is an implied condition that the property insured shall have a neutral character at
the commencement of the risk, and that, so far as the assured can control the matter, its neutral
character shall be preserved during the risk.
b) Warranty of good safety – the warranty that the subject-matter insured is warranted "well" or "in
good safety"
c) Warranty of seaworthiness of ship - in a voyage policy there is an implied warranty that at the
commencement of the voyage the ship shall be seaworthy for the purpose of the particular
adventure insured. Where the policy attaches while the ship is in port, there is also an implied
warranty that she shall, at the commencement of the risk, be reasonably fit to encounter the
ordinary perils of the port.
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d) Where the policy relates to a voyage which is performed in different stages, during which the ship
requires different kinds of or further preparation or equipment, there is an implied warranty that
at the commencement of each stage the ship is seaworthy in respect of such preparation or
equipment for the purposes of that stage.
e) A ship is deemed to be seaworthy when she is reasonably fit in all respect to encounter the
ordinary perils of the seas of the adventure insured.
In a time policy there is no implied warranty that the ship shall be seaworthy at any stage of the
adventure, but where, with the privity of the assured, the ship is sent to sea in an unseaworthy
state, the insurer is not liable for any loss attributable to unseaworthiness.
f) In a voyage policy on goods or other movables there is an implied warranty that at the
commencement of the voyage the ship is not only seaworthy as a ship, but also that she is
reasonably fit to carry the goods or other movables to the destination contemplated by the policy
g) Warranty of legality.- There is an implied warranty that the adventure insured is a lawful one, and
that, so far as the assured can control the matter, the adventure shall be carried out in a lawful
manner.
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Classifications Of Marine Insurance
The three most common types of marine insurance are hull, cargo, and protection and indemnity (P&I). There
is no such thing as a standard marine insurance policy. That is, not all marine insurance plans are built the
same. Different companies insure against different risks depending on the unique needs of each client they
work with. Additionally, marine insurance providers may use their own types of custom policies or they might
use forms issued by other entities.
Hull Insurance
Hull insurance is part of the marine insurance policy that covers the physical damage to the craft itself. There
are a variety of different types of coverage in this area that depend on your craft’s unique details and the type
of operation you are involved in.
Different policies exist for different types of crafts. These include fishing boats, tugs, barges, yachts, large
commercial vessels, and passenger-carrying vessels. The coverage may apply for a certain period of time or just
one voyage. Coverage under a hull policy usually falls under either an “all-risk” or “named perils” category.
An “all-risk” policy covers all risks of physical loss or damage to a vessel from an external cause, while named
perils cover physical loss or damage from the perils that are specifically named in the policy. Common
exclusions to these can include wear and tear, ice, and improper/inadequate maintenance. Typical named
perils that companies often automatically use will include inclement weather, fire, pirates, and other perils that
may be unique to your operation.
Cargo Insurance
As the name suggests, cargo insurance involves coverage for the goods and products that your marine craft is
responsible for shipping. These policies often go into effect as soon as the voyage begins and cover a wide
range of risks. Every operation will have its own risks, however, which makes it very important to have this
section customized to the unique risks you face. For example, you may need specialized terms in your policy
for refrigerated or other special types of goods.
Protection And Indemnity Insurance
P&I covers the vessel owner’s liability for injury to or death of persons aboard the insured vessel. This is simply
a insurance version of typical liability insurance for the owner and operator of the vessel. P&I policies also
cover liability for injuries or death suffered by persons on shore caused by the negligence of the vessel’s crew.
The liabilities found in this section, as with the others, are subject to customization based on the unique risks
that you and your agent deem important to your operation.
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Perils of the sea in marine insurance include extraordinary forces of nature faced by maritime ventures
during the voyage. Perils of the sea covers damages to ship during the voyage by the Acts of God. It
includes those accidents or causalities which do not happen due to the free will of a human being. Further
perils of the sea in marine insurance comprise losses only to goods on board. It also safeguards against
losses of goods from the overwhelming power lying beyond human skill and prudence. It does not include
the natural and ordinary action of the wind.
The following situations are covered under perils of the sea and they are as follows:-
1. Foundering at the sea- If the ship has not arrived at its destination and no news has been
received, it is considered as missing after a reasonable time has passed. The loss due to missing or
sinking of the ship under the sea may be presumed to be by the perils of the sea.
2. The destruction of the ship (ship wreck) - if a ship hits a sunken rock and sinks or collides against a
rock or driven to the shore by heavy winds it is considered as a ship wreck. The loss due to ship
wreck may be presumed to be by the perils of the sea. The shipwreck may occur in various ways.
E.g. – The ship may be so shattered that it becomes a mere collection of planks and in that case it
is unable to navigate.
3. Stranding- It happens when the ship by an accident gets of the ordinary course of the voyage and
gets struck up in the shallow regions of sand and received injury. The loss of subject matter due
to stranding is covered under the policy. If it is due to the negligent act of the ship captain it will
not come under peril of sea.
4. Collision - Collision is the phenomenon of the ship striking against another ship or any other
subject matter. The loss of subject matter due to collision is covered under the policy.
5. Fire- One of the most common perils of the sea is fire. If the fire is caused and the cargo or the ship
is damaged, the insurance company will be liable. Though every type of fire is not covered in the
insurance policy, it will not include the loss caused by the inherent vice of the subject matter
insured means if the subject matter is explosive and in exploded between to journey insurance
company is not liable. In case of fire caused voluntarily in order to protect the subject matter form
an enemy capture during the voyage the insurance company will be liable.
6. Enemies- The term ―enemy‖ means a person who is actively harms and has an ill feeling to
another someone, a hostile nation or its armed forces especially in times of war. The peril of the
sea includes all the losses due to capture and seizure. Here the term capture not only include
taking by an enemy but also by revenue and statutory authorities.
7. Loss by arrest detention - It there is a loss due to any restraint by political or executive acts
generally called restraints of princes, kings, etc. It will be included under the policy. The policy does
not include loss by mob in a riot, arrest by a judicial process i.e. the arrest by order of government
prohibiting a ship or goods from a port.
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Marine losses can be broadly categorized into two main categories: Total Loss and Partial Loss.
1. Total Loss in Marine Insurance : Imagine your shipment is traveling across the ocean, and suddenly, a
disaster strikes—your goods are destroyed beyond repair, or worse, the vessel carrying them vanishes
without a trace. This is a prime example of a Total Loss in marine insurance, where insured goods
lose 100% or nearly 100% of their value.
The significance? Experiencing a total loss can be financially devastating for businesses involved in import
and export.
This is why having comprehensive marine insurance is vital—it ensures you're covered when the
unexpected happens, allowing you to claim compensation through your insurance claim letter for
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reimbursement and safeguarding your business from crippling losses.
Types of Total Loss: Actual and Constructive
Total Loss can be divided into two main categories: Actual Total Loss and Constructive Total Loss.
a) Actual Total Loss: This occurs when the goods are destroyed or are lost beyond any chance of
recovery. Think of it as a scenario where your cargo is either physically obliterated or has disappeared
entirely, with no hope of being retrieved.
Examples:
 Fire Damage: If your goods are destroyed by fire during transit, resulting in destruction, it qualifies as
an actual total loss.
 Missing Vessel: When a vessel carrying your shipment goes missing, and there’s no reasonable
chance of recovery, it falls under actual total loss.
Why It Matters: In such situations, the insurer typically pays the full insured amount under your marine
cargo insurance. Exporters and importers are protected from losing their entire investment.
b) Constructive Total Loss
This happens when the goods or vessels are so severely damaged that the cost of repairs exceeds their
total value. Unlike actual total loss, you still possess the goods here, but repairing or recovering them
would be impractical or financially unviable.
Examples:
 Pirate Abduction: Imagine your vessel gets hijacked, and the repair or ransom costs after the ordeal
exceed the value of your cargo. This would be considered a constructive total loss.
 Severe Storm Damage: If your goods are severely damaged in a storm, and the cost of retrieving and
repairing them outweighs their actual value, you’d be looking at a constructive total loss.
Why It Matters: Recognizing a constructive total loss ensures you can claim the insured amount instead
of spending more on repairs. It helps you avoid further financial strain, making your marine insurance
policy worth the investment.

2. Partial Loss in Marine Insurance : Ever received a shipment where some goods were damaged while
others arrived intact? This situation exemplifies a Partial Loss in marine insurance.
Unlike a total loss, a partial loss involves damage to only a portion of the insured goods, affecting their
overall value but not resulting in destruction.
For businesses engaged in import and export, understanding partial loss is crucial for accurately assessing
the value of damaged goods and ensuring adequate compensation through marine cargo insurance.
This ensures minimal financial impact, allowing you to maintain seamless operations in your supply chain
management.
Types of Partial Loss: Particular Partial Loss and General Average Loss
Partial losses can be categorised into Particular Partial Losses and General Average Losses.
a) Particular Partial Loss : This occurs when only a specific part of the consignment is damaged or lost
during transit. This could mean some goods arrive damaged while the rest remain unaffected.
In such cases, the insurer calculates the depreciated value of the damaged goods upon arrival to
determine compensation under the marine insurance policy.
Example: If you’re importing electronics and some units are damaged during shipping while the rest are
intact, this is a particular partial loss. You can claim the depreciated value of the damaged goods through
your insurance claim letter for reimbursement.
Tip: Always conduct a shipment inspection upon receiving your goods to identify any damages and
initiate the claims process promptly.
b) General Average Loss : This partial loss occurs when intentional damage is inflicted on certain goods to
avoid a greater danger. It’s a shared loss among all parties involved in the voyage, meaning every
stakeholder contributes to the financial burden.
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Example:
 Imagine a ship carrying chemicals encounters rough seas, and the crew throws the chemicals
overboard to prevent contamination. The loss incurred here is classified as a general average loss,
and all parties, including you as the importer or exporter, would share the cost.
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What is Voyage Deviation in Marine Insurance?
Marine insurance is crucial to safeguarding maritime assets and ensuring smooth sailing for shipowners.
Amidst the sea of terms, one that demands attention is "Voyage Deviation."
This nautical jargon refers to any intentional detour from the agreed-upon course during a sea journey. In
the realm of marine insurance, understanding voyage deviation is paramount. It involves potential risks
and implications that can impact coverage and claims.
Voyage Deviation in Marine Insurance: An Overview
Voyage policy related to deviation in marine insurance refers to any intentional change in a ship's route
from the originally planned and agreed-upon course. This can happen for various reasons, such as:
Weather conditions: Avoid storms or seek safe refuge during bad weather.
Mechanical problems: Needing to divert to a port for repairs.
Cargo requirements: Responding to unforeseen circumstances with the cargo, like picking up additional
cargo or assisting a distressed vessel.
Market opportunities: Taking advantage of a price change or new destination for the cargo.
A ship strays from its planned route, which can significantly affect insurance coverage. Marine insurance
usually protects the ship and its cargo for a particular journey, and any deviation from this journey may
lead to the policy being void or restricted.
Many marine insurance policies have a "seaworthiness" requirement, meaning the vessel must be in good
condition at the voyage's beginning and stay that way. If the ship deviates from its intended course, it
might be deemed unseaworthy, potentially causing the insurer to reject coverage for losses resulting
from the deviation.
Therefore, shipowners must grasp the consequences of changing course during a voyage and take steps
to reduce the associated risks. It's important to understand that such changes can also affect the ship's
responsibility for any damages or losses that happen during the deviation.
If the shift from the original route is seen as unnecessary or unreasonable, the shipowner or operator
might be held responsible for resulting damages. To avoid problems, the ship owner or operator should
inform the insurer before making any planned changes. The insurer will evaluate the risks and may adjust
the policy to cover the extra dangers.
Effect of Voyage Deviation in Marine Insurance - Financial & Legal Implications
Understanding voyage deviation and the specific clauses in the insurance policy is crucial for the insured.
This prevents accidental policy voiding, ensures proper communication with the insurer, and avoids
potential financial losses in case of claims.
Also, it is crucial to know that voyage deviation can have significant legal and financial implications for
various parties involved, including:
Breach of Contract: Deviating from the agreed-upon voyage may constitute a breach of contract with the
cargo owner or charterer. This can lead to legal action and potential liability for damages, delays, and
additional costs incurred.
Increased Insurance Premiums: Frequent or unauthorised deviations can result in higher insurance
premiums due to the perceived increased risk.
Damage or Loss of Cargo: Increased exposure to unforeseen risks by deviating from the planned route
can lead to damage or loss of cargo. The cargo owner may have limited recourse for claims if the
deviation was unauthorised or not covered by insurance.
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Delays and Cost Overruns: Deviation can cause delays in delivery, disrupting the cargo owner's supply
chain and resulting in additional costs such as storage fees and missed deadlines.
Legal Disputes: If the deviation arises from disputes with the shipowner or charterer, the cargo owner
may be involved in legal action to recover losses.
General Average Contribution: In rare cases where intentional deviation is deemed necessary for the
common safety of the voyage and cargo, a general average contribution might be levied on all cargo
owners to share the resulting expenses.
Subrogation Rights: If the deviation was caused by the shipowner's or the charterer's negligence, the
insurer may have the right to pursue legal action against them to recover the amount paid out for claims.
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A Few Exclusions from the Perils of Sea Under Marine Insurance Plans
While "perils of the sea" can offer significant protection for maritime ventures, it is crucial to understand the
exclusions that limit its coverage. These are events deemed outside the realm of unforeseen and unavoidable
natural forces, often attributed to human actions or inherent qualities of the cargo.
Here are some common exclusions:
 Inherent vice: Deterioration or spoilage of cargo solely due to its inherent nature, properties, or
chemical reactions is not covered. This includes perishables expiring or unstable materials reacting
dangerously.
 Negligence: Damage caused by the captain's or crew's errors in judgement, faulty navigation, or
improper operation of the vessel is generally excluded.
 Wear and tear: Gradual damage or loss of value due to ordinary wear and tear during the voyage is not
covered.
 War and related events: Losses caused by war, piracy, strikes, riots, or civil unrest are typically excluded
from the perils of sea coverage.
 Consequential losses: Indirect or financial losses, such as delay in delivery, loss of market, or loss of
profits, are often not covered.
 Infestation and vermin damage: Losses caused by pests like rats or insects attacking the cargo are
typically excluded.
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Explain Life insurance
Life insurance business covers the risk of contingencies dependent on human life. For example payment of
an amount (called ―sum assured‖) on the death of the life assured. Further, annuity contracts (which
provide for periodic payments to life assured as long as the policyholder is alive) or the provisions of
accident benefits also form part of life insurance business.

A life insurance is essentially a contract between an individual and an insurance provider, where the
company promises to pay a specified amount of money to the family or beneficiary of the individual, in
return for regular payments over a period of time. These payments are known as premium and are usually
paid on an annual basis. The individual who buys the insurance is known as the policy holder. Life
Insurance contract can be defined as a contract between an insurance policy holder and an insurance
company, where the insurer promises to pay a sum of money in exchange for a premium, upon the death of
an insured person or after a set period.
Life insurance assures lump sum amount to be paid to the family if the policyholder passes away
unexpectedly. Though money cannot make up the loss, it ensures no financial hiccups to the family even
after the demise of the breadwinner.
The life insurance policy provides with the much-needed cover against risk and offers you opportunities to
grow your savings. It is also an effective tool that enables you to save for future expenses that may occur,
such as the higher education or marriage of children. Life insurance has meaning especially for those with
minor children, children with special needs, those who wish to secure the financial future of their family or
wish to build savings over the long term.
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Functions of the life Insurance
Section 6 of the Life Insurance Corporation of India Act, 1956 provides the functions of the life Insurance
Corporation of India and they are:-
1. To collect the savings of the people through a life insurance policy and invest that money in
various financial markets.
2. One of the main functions of LIC is to invest fund into government securities so as to protect
the capital of the people who have given their money to LIC.
3. LIC has to issue an insurance policy at affordable rates to people.
4. LIC provides direct loans to industries at lower interest rates. The rate of interest is as low as
12% for the entire tenure.
5. It is one of the major stakeholders in many of the blue-chip companies in the Indian stock
market.
6. It also provides refinancing activities through SFCs in different states and cities.
7. It also invests in the various corporates via bonds and securities, thus supports corporate
funding in an indirect way.
8. It also gives loan to the various national projects which are important for economic growth.
9. It provides financial supports to socially-oriented projects like electrification, sewage, and
water channelizing, etc.
10. It also gives a housing loan at reasonable rates.
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The different types of Life Insurance Policies are as follows:-
1. Term Insurance Plan- The term insurance plan is one of the most sought-after types of life
insurance policies in India. This is one of the types of life insurance policy in India that you can buy for a
specific period of 10, 20, 30 or more years, hence the name. While some other types of life insurance
policy offer maturity benefits, term insurance does not. Term insurance is pure life cover, unlike other
types of life insurance policies which have a saving component. You can also opt for a significant life cover
at a lower premium as compared to other types of life insurance policy which are costlier but have built-in
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saving components.
2. Term Insurance with Return of Premium- A term insurance plan is amongst the types of
life insurance policies that provides a death benefit but no maturity benefit. If you live a healthy lifestyle,
the probability that you will outlive the best insurance policy in India you have bought also increases.
For you, among the many life insurance types, a term insurance with return of premium is one of the best
insurance policies in India, which also gives you maturity benefits. It is one of the types of term insurance
plans that give back the premiums you pay on surviving the policy period. When you calculate premium
for term insurance, you get a clear understanding about your unique requirements, explore rider options,
and also choose your policy term.
3. Unit Linked Insurance Plan (ULIP)- You may face a dilemma in life about choosing between any of the
two options investment or insurance. A ULIP is one of the types of life insurance policies in India that fulfil both
these aspects. Amongst different types of life insurance, it is the one that offers life cover along with investment
opportunities. Being one of the types of life insurance, it has a lock-in period of five years, which makes it a long-
term investment instrument that comes with risk protection. ULIPs also allow you to balance your funds as per
market dynamics.
4. Endowment Policy- Endowment policies are one of the types of life insurance policies
that provide you with the combined benefit of life insurance and savings. Along with giving you the
life cover, these types of life insurance help you save money regularly over a period to get a lump sum
at maturity. What makes them one of the most useful types of life insurance policies is that they help
fulfil long-term goals in life. You will also get the maturity amount if you survive the policy tenure.
Endowment policies, being one of the most appropriate types of life insurance plans, also help you create
a financial cushion for your family to meet various financial objectives in life.
5. Money back Policy- The purpose of investing in the insurance policy in India for your loved ones can
be to create wealth over an extended period. However, most of the types of life insurance do not provide
any provision to get funds before their tenure ends. It is where a money back policy plays a vital role in
solving the problem of liquidity. As the name suggests, money back policies are one of the popular types of
life insurance policies in India that give money back regularly. It pays a percentage of the assured sum
throughout the policy tenure, unlike other types of life insurance plans that offer no returns till maturity.
6. Whole Life Insurance- As a life insurance policyholder, you get the benefits depending on the
types of life insurance policies you have chosen. What distinguishes a whole life insurance plan from other
life insurance types is that it provides insurance coverage to the insured for the entire life, up to 100 years
of age. Typically, the death benefit, under a whole life insurance, is payable to the beneficiary in the case
of the untimely demise of the policyholder. On the other hand, you are
eligible to receive a maturity benefit under a whole life insurance policy if you cross 100 years of
age. Another significant feature of such whole life insurance plans is that some offer the option to
pay premium for the first 10-15 years while you get the benefits for the entire life.
1. Group Life Insurance - Just like group health insurance, group life insurance is one of the types of
life insurance policies that covers a group of people under one master policy. Such life insurance
types are generally provided as part of an employment benefit. A unique feature of these types of
life insurance products is that you will get the insurance cover if you remain a part of the group. It
is different from the individual types of life insurance plans in which the coverage continues
throughout the chosen policy tenure.
2. Child Insurance Plans - When it comes to life insurance types, a child plan is an
investment+insurance plan that helps you meet your child‘s financial needs. A child insurance plan
will help you create wealth for your child‘s future needs like education.
You can start investing in these plans from the birth of your child. You get the flexibility of
investing your hard earned money into several funds on the basis of your financial condition and
goals in mind.
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3. Retirement Plans - Retirement Plans are amongst the types of life insurance policies that
provides financial security and help you with wealth creation after your retirement. With
Retirement Plan, you will get a sum of money as pension in the vesting period. In case of your
untimely demise during the policy term, your nominee will get the death benefits. Retirement
Plans comes with death benefit as well as vesting benefit providing protection to you and your
family members.
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Insurance Ombudsman
The institution of Insurance Ombudsman was created by a Government of India Notification dated 11th
November, 1998 with the purpose of quick disposal of the grievances of the insured customers and to
mitigate their problems involved in redressal of those grievances. This institution is of great importance
and relevance for the protection of interests of policy holders and also in building their confidence in the
system. The institution has helped to generate and sustain the faith and confidence amongst the
consumers and insurers. Office of Insurance Ombudsman is an alternate Grievance Redressal platform
which has been setup with an aim to resolve grievances of aggrieved policyholders of all personal lines of
insurance, group insurance policies, policies issued to sole proprietorship and micro enterprises, against
Insurance Companies and their agents and intermediaries in a cost- effective and impartial manner. The
Offices of Insurance Ombudsman are under the administrative control of Council for Insurance
Ombudsmen (CIO), which has been constituted under the Insurance Ombudsman Rules, 2017.
The governing body of insurance council issues orders of appointment of the insurance Ombudsman on
the recommendations of the committee comprising of Chairman, IRDA, Chairman, LIC, Chairman, GIC and
a representative of the Central Government. Insurance council comprises of members of the Life
Insurance council and general insurance council formed under Section 40 C of the Insurance Act, 1938.
The governing body of insurance council consists of representatives of insurance companies.
Ombudsman is drawn from Insurance Industry, Civil Services and Judicial Services. An insurance
Ombudsman is appointed for a term of three years or till the incumbent attains the age of sixty five years,
whichever is earlier. Re-appointment is not permitted. There are 17 Ombudsman Centres, covering the
country, situated in Ahmedabad, Bengaluru, Bhopal, Bhubaneswar, Chandigarh, Chennai, Delhi,
Guwahati, Hyderabad, Jaipur, Kochi, Kolkata, Lucknow, Mumbai, Noida, Pune and Patna.
Insurance Ombudsmen are empowered to entertain complaints on the following aspects in respect of
personal line insurances:-
a) Any partial or total repudiation of claims by an insurer.
b) Any dispute in regard to premium paid or payable in terms of the policy.
c) Any dispute on the legal construction of the policies in so far as such disputes relate to claims.
d) Delay in settlement of claims.
e) Non-issue of any insurance document to customers after receipt of premium.
The Ombudsman will act as mediator and arrive at a fair recommendation based on the facts of the
dispute. If you accept this as a full and final settlement, the Ombudsman will inform the company which
should comply with the terms in 15 days.
If a settlement by recommendation does not work, the Ombudsman will pass an award within 3 months
of receiving all the requirements from the complainant and which will be
binding on the insurance company. Once the Award is passed, the Insurer shall comply with the award
within 30 days of the receipt of award and intimate the compliance of the same to the Ombudsman.
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Powers and Functions of Insurance Regulatory and Development Authority of India. [IRDA]
As per Section 14 of the Insurance Regulatory and Development of Authority Act, 1999 the Insurance
Regulatory and Development Authority has to ensure the regulation, development and promotion of the
insurance business and reinsurance business. Following are the other powers, duties and functions of the
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Insurance Regulatory and Development Authority:-
a) To avail the applicant a certificate of registration, renewal, modification, withdrawal,
suspension or cancellation of such registration.
b) To protect the interests of the policy holders in cases related to assigning and nomination of
policy holders, understanding of insurance claims, insurable interests, surrendering of the value
of the policy and other terms and conditions of the insurance contract.
c) To specify the necessary qualifications, code of conduct and practical training for intermediary
or insurance intermediaries and agents.
d) To specify code of conduct for surveyors and loss assessors.
e) To ensure that the proficiency and efficiency of the conduct of the business of insurance.
f) To encourage and regulate the relationship between the professional organisations and the
insurance and reinsurance businesses.
g) To levy charge to carry out the purpose of the Act.
h) To call for the information, undertaking an inspection of, conducting enquiries and
investigations including the audit of insurers, intermediaries, insurance intermediaries and
other organisations connected with the insurance business.
i) To control and regulate rates, advantages, terms and conditions that may be offered by
general insurance companies.
j) To specify the form and manner in which books of account shall be maintained by insurance
companies and intermediaries.
k) To maintain the investment funds by the insurance companies.
l) To regulate the maintenance of margin solvency.
m) To decide the disputes between the insurers and the intermediaries of insurance
intermediaries.
n) To supervise the functioning of Tariff Advisory Committee
o) To set down the percentage premium income of the insurer of finance schemes for promoting
and regulating the professional organisations.
p) To protect the interests of the policyholders in cases related to assigning and nomination
of policyholders.
q) To set out the percentage of life insurance business and general insurance business to be taken
forward by the insurer in the rural or social sector.
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Nationalisation of life insurance
The nationalisation of life insurance is an important step in our march towards a socialist society. Its
objective will be to serve the individual as well as the state. We require life insurance to spread rapidly all
over the country and to bring a measure of security to our people. – Jawaharlal Nehru. The first step
towards nationalisation of life insurance was taken on 19 January 1956 by the promulgation of the Life
Insurance (Emergency Provisions) Ordinance, 1956. In terms of this Ordinance, the management of the
‗controlled business‘ of insurers was vested in the central government. The period between 19 January
1956 and 31 August 1956 was utilised as a period of preparation to facilitate the subsequent integration
of the various insurers into a single State-owned Corporation.
Before nationalisation, the insurance industry was organised into 243 autonomous units, each with its
own separate administrative structure of office and field staff, its own separate set of agents and of
medical examiners. Their offices concentrated in the large cities and their field of operation was confined
to the major urban areas.
Out of 145 Indian insurance companies, as many as 103 had their head offices in the four cities of
Bombay, Calcutta, Delhi and Madras. When the Corporation was constituted on 1 September 1956, it
integrated into one organisation, the controlled business of 243 different units, Indian and foreign, which
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were engaged in the transaction of life insurance business in India. The total assets of the above 243 units
as on 31 August 1956 were about Rs 4,110 million and the total number of policies in force was over five
million assuring a total sum of more than Rs 12,500 million. The total number of salaried employees was
nearly 27,000. These figures give a broad idea of the magnitude of the problem involved in setting up an
integrated structure. When parliament set up LIC as a monopolistic public undertaking, it was argued and
believed that elimination of competition and the malpractice that competition has given rise to, would
lead to:-
a) Better and more economical management of the Business of life insurance.
b) Reduction in administrative expenses.
c) Improvement in the quality of service.
d) Increase in volume of business.
e) Maximisation of social advantages that insurance can provide through higher returns on investments of
life fund, consistent with safety and liquidity of the invested funds.
f)
The Corporation had an Executive Committee consisting of the Chairman, two Managing Directors and
two other Members of the Corporation. There was also an Investment Committee consisting of the
Chairman, a Functional Director, and five other persons, to advise the corporation in matters referred to it
relating to the investment of its funds.
--------------------------------------------

Nomination Assignment
1. Nomination is appointing 1. Assignment is transfer of rights, title and interest of the
some policy to some person(s).
person(s) to receive policy benefits only when the
policy has a death claim
2. In other words, by merely nominating someone, 2. In other words, the insurer is bound to pass over the
the right, title and interest of the insured over the benefits, claims and/or interests to the assigned person(s).
policy is not transferred straight forwardly to that Even during the time the insured is alive (or even prior to the
nominated person and remains with the insured death of the insured person). Since the policy benefits are
person only. assigned till the time the assignment is revoked once again.

3. Nomination is done at the instance of 3. Along with the instance of the insured, consent
the insured of insurer is also required
4. It can be changed or revoked several times. 4. Normally assignment is done once or twice during
the policy period. Assignment can be normally revoked
after obtaining the "no objection
certificate" from the concerned Assignees.
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Fire insurance and its perils

As per the Insurance Act 1938, under Section 2 (6A), Fire Insurance is defined as ―the business of
effecting, otherwise than independently to some other class of business, contracts of insurance against
loss by or incidental to fire or other occurrence customarily included among the risks insured against in
fire insurance policies.‖ Fire insurance is an agreement whereby one party (the insurer), in return, for a
consideration undertakes to the indemnify the other party (the insured) against financial loss which he
may sustain by reason of certain defined subject matter being damaged by the destroyed by fire or other
defined perils up to an agreed amount. The word fire here does not mean the fire used for domestic and
household activities. It refers to fire which is not caused intentionally and has no bound, and it is
production of ignition, light and smoke by combustion. Fire insurance policies are issued for one year
except for dwellings, where a policy may be issued for long term (with a minimum period of three years).
Fire insurance is a form of property insurance that offers extra compensation for loss or damage to a
building that has been damaged or destroyed by a fire. The contract specifies the maximum amount,
agreed to by the parties at the time of the contract, which the insured can claim in case of loss. This
amount is not, however, the measure of the loss. The loss can be ascertained only after the fire has
occurred. The insurer is liable to make good the actual amount of loss not exceeding the maximum
amount fixed under the policy. A fire insurance policy cannot be assigned without the permission of the
insurer because the insured must have insurable interest in the property at the time of contract as well
as at the time of loss. The insurable interest in goods may arise out on account of (i) ownership, (ii)
possession, or contract. A person with a limited interest in a property or goods may insure them to cover
not only his own interest but also the interest of others in them.
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Fire Insurance Perils
Here's a shuffled list of 12 standard fire insurance policy perils:
Natural Calamities: Standard fire insurance protects against storms, cyclones, hurricanes, and floods, but not
earthquakes or volcanic eruptions. Additional coverage is available for these exclusions.
Lightning: This covers damages caused by lightning, such as harm to the roof or building.
Riots, Strikes, or Terrorist Activity: This includes losses or damages from external, violent situations like riots,
strikes, or terrorist acts.
Aircraft Damage: Special perils insurance covers loss or damage caused by aircraft or other aerial devices.
Subsidence and Landslide: This covers damage from landslides or subsidence, with exclusions for normal
cracking, coastal erosion, and defective design or materials.
Fire: Generally, fire damage is covered, excluding destruction caused by fermentation or natural heating.
Missile Testing Operations: This covers damages from missile testing operations.
Leakage from Automatic Sprinkler Installations: This includes accidental leakage from sprinkler installations,
excluding damages during repairs or alterations.
Bush Fire: This covers bush fire damage but not forest fires.
Bursting/Overflowing of Water Tanks, Pipes, and Apparatus: This covers damages from bursting pipes, water
tanks, and apparatus.
Impact Damage: This covers damage from direct contact with any vehicle or animal not belonging to the
insured or their employees.
Explosion/Implosion: This covers damages from explosions or implosions, excluding losses to boilers,
economizers, or machinery producing steam.
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Discuss the nature and scope of Motor Insurance.

Motor Vehicles Act, 1939 consolidates and amends the law relating to motor vehicles. This has been
amended several times to keep it up to date. The Motor Vehicles Act, 1988 which came into force on 1st
July, 1988 and which is divided into XIV Chapters, 217 Sections and two schedules, makes it compulsory
for every motor vehicle to be insured. Chapters XXI and XII of the 1988 Act deals with compensation
provisions. Sections 140 to 144 (Ch. X) deal with liability without fault in certain cases. Chapter XI (Section
145 to 164) deal with insurance of motor vehicles against third party risks.

In India, under the provisions of the Motor Vehicles Act, 1988, it is mandatory that every vehicle should
have a valid Insurance to drive on the road. Any vehicle used for social, domestic and pleasure purpose
and for the insurer's business motor purpose should be insured. Insurance is a contract whereby one
party, the insurer, undertakes in return for a consideration, the premium , to pay the other, the insured or
assured, a sum of money in the event of the happening of a , or one of various , specified uncertain
events.

Section 140 of the Motor Vehicles Act deals with no fault liability. The term ‗no fault liability' means
when an accident has occurred due to use of a motor vehicle or motor vehicles and has caused either
death or some sort of injury, the owner of the vehicle is still liable to pay compensation even if it isn't his
or her fault. Where death or permanent disablement occurs to any person as a result of an accident due
to the use of a motor vehicle, the owners of the vehicle shall be liable to pay compensation for such death
or disablement in accordance with the provisions of this section.

Motor third-party insurance or third-party liability cover, which is sometimes also referred to as the ‗act
only' cover, is a statutory requirement under the Motor Vehicles Act. It is referred to as a third-party
cover since the beneficiary of the policy is someone other than the two parties involved in the contract
i.e. the insured and the insurance company. The policy does not provide any benefit to the insured;
however it covers the insured's legal liability for death/disability of third party loss or damage to third
party property.
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Social insurance
Social insurance is a set of insurance programs that are administered by a government. Just like private
sector insurance, they provide benefits upon the occurrence of certain insured events. For example,
unemployment insurance provides benefits if an insured person become unemployed. Additionally, just
like private sector insurance programs, only citizens that contribute to a social insurance program are
eligible to receive benefits from the program.
Social insurance is one of the devices to prevent an individual from falling to the depths of poverty and
misery and to help him in times of emergencies. Insurance involves the setting aside of sums of money in
order to provide compensation against loss, resulting from particular emergencies. The elimination of the
risk of the individual is the basic idea of insurance. It is primarily the effort of the social group, in place of
the individual effort, to lessen the incidence of loss on the individual.
We may define social insurance as ―a co-operative device, which aims at granting adequate benefits to
the insured on the compulsory basis, in times of unemployment, sickness and other emergencies, with a
view to ensure a minimum standard of living, out of a fund created out of the tripartite contributions of
the workers, employers and the State, and without any means test, and as a matter of right of the
insured‖.
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The main features of social insurance are as follows:-
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1. It involves the establishment of a common monetary fund out of which all the benefits in cash or
kind are paid, and which is generally built up of the contribution of the workers, employers and
the State.
2. The contribution of the workers is merely nominal and is kept at a low level so as not to exceed
their paying capacity, whereas the employers and the State provide the major portion of the
finances.
3. Benefits are granted as a matter of right and without any means test, so as not to touch the
beneficiaries‘ sense of self-respect.
4. Social insurance is now provided on a compulsory basis so that its benefits might reach all the
needy persons of the society who are sought to be covered.
5. The benefits are kept within fixed limits, so as to ensure the maintenance of a minimum standard
of living of the beneficiaries during the period of partial or total loss of income.
6. It has to be borne in mind that social insurance alleviates the sufferings of the individual from the
particular event, but, it does not prevent it.
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Powers and award of Claims Tribunal under the Motor Vehicles Act, 1988.
A7a) Section 169 of the Motor Vehicles Act, 1988 provides for the power of Claims Tribunal. According
to this section the following are the powers of claims tribunal:-
a) in holding any inquiry under section 168, the Claims Tribunal may, subject to any rules that may
be made in this behalf, follow such summary procedures as it thinks fit.
b) The Claims Tribunal shall have all the powers of a Civil Court for the purpose of taking evidence
on oath and of enforcing the attendance of witnesses and of compelling the discovery and
production of documents and material objects and for such other purposes as may be
prescribed; and the Claims Tribunal shall be deemed to be a Civil Court for all the purposes of
section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973.
c) Subject to any rules that may be made in this behalf, the Claims Tribunal may, for the purpose of
adjudicating upon any claim for compensation, choose one or more persons possessing special
knowledge of any matter relevant to the inquiry to assist it in holding the inquiry.
Section 168 of the Motor Vehicles Act, 1988 provides for the award of the claims tribunal . According to
this section, on receipt of an application for compensation made under section 166, the Claims Tribunal
shall, after giving notice of the application to the insurer and after giving the parties (including the insurer)
an opportunity of being heard, hold an inquiry into the claim or, as the case may be, each of the claims
and, subject to the provisions of section 162 may make an award determining the amount of
compensation which appears to it to be just and specifying the person or persons to whom compensation
shall be paid and in making the award the Claims Tribunal shall specify the amount which shall be paid by
the insurer or owner or driver of the vehicle involved in the accident or by all or any of them, as the case
may be. Where such application makes a claim for compensation under section 140 in respect of the
death or permanent disablement of any person, such claim and any other claim (whether made in such
application or otherwise) for compensation in respect of such death or permanent disablement shall be
disposed of in accordance with the provisions of Chapter X Section 168 further mentions that, the Claim
Tribunal shall arrange to deliver copies of the award to the parties concerned expeditiously and in any
case within a period of fifteen days from the date of the award When an award is made under this
section, the person who is required to pay any amount in terms of such award shall, within thirty days of
the date of announcing the award by the Claims Tribunal, deposit the entire amount awarded in such
manner as the Claims Tribunal may direct.
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The main objectives of the Public Liability Insurance are as follows:-
The main objective of the Public Liability Insurance Act 1991 is to provide for damages to victims of an accident
which occurs as a result of handling any hazardous substance. The Act applies to all owners associated with the
production or handling of any hazardous chemicals.
1. The Public Liability Insurance Act, 1991 (the Act) was brought into effect to provide immediate
relief and support to those affected by any accident while working/ dealing with hazardous
substances at the workplace. More often than not, certain business operations dealing with
activities involving hazardous materials can lead to unexpected and adverse impacts. The
employees working at such a facility and its surroundings, including people living in the vicinity,
the environment at large are severely affected and also causes property damage. Keeping in mind
social, environmental and financial aspects, the government deemed it essential to put in place a
mechanism that ensured accountability for any incidental damages while carrying out such
business operations.
2. The Act applies to all owners or any person controlling the handling of hazardous substances. The
owner is deemed to undertake one or more insurance policies providing insurance contracts,
which insures him against the liability of providing relief claimed by the person, who may have
suffered loss or damage due to any activity of handling the hazardous substances. Section 3 of the
Act provides for the principle of 'no-fault liability' on the owners, which makes it certain that the
owner shall provide adequate relief to the worker in case of death or injury or damage of property
caused as a result of an accident at the workplace. This Section permits the claimant to seek
compensation without having to plead that the damage or injury was caused due to the owner's
negligence.
3. The Act empowers the Central Government to constitute an Environmental Relief Fund to provide
immediate relief by utilizing the funds to facilitate rehabilitation, medical and other facilities for
the survivors.
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No Fault Liability: Section 3 of the Public Liability Insurance Act, 1991 provides for "No Fault Liability"
under Public Liability Insurance Act, 1991. According to this section, where death or injury to any person
(other than a workman) or damage to any property has resulted from an accident, the owner shall be
liable to give such relief as is specified in the Schedule for such death, injury or damage.
Section 3 of the Public Liability Insurance Act, 1991 further mentions that in any claim for relief the
claimant shall not be required to plead and establish that the death, injury or damage in respect of which
the claim has been made was due to any wrongful act, neglect or default of any person.
Moreover, the public liability insurance act, 1991 imposes the following liability on the owner:-
a. Ensure undertaking one or more insurance policy against any accident or mishap at the workplace
while handling hazardous substances and that such policy is renewed in a timely manner;
b. Section 4 of the Act prescribes the limit of such insurance policy and also the liability of the insurer
under one assurance policy;
c. Ensure adequate relief to the claimant for any loss or damage caused due to the hazardous
substances. Such claim may be made by the person suffering the damage or loss or in case of a
casualty, the legal representative of the deceased or through an authorized agent;
d. The insurance claim shall cover bodily injury or property damage that occurred due to the business
operations, which in addition to a person suffering injury or loss; also includes property damage,
which may be sought by the owner who has suffered property damage due to the hazardous
material.
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RE-INSURANCE
Re-insurance refers to insurance that is purchased by one insurance company from one or more other
insurers. The contract, called a policy, refers to the company which buys the insurance as the cedant. The
company from which the cedant buys insurance is called the reinsurer. The cedant pays a premium to the
reinsurer. In return, the reinsurer will pay a share of the compensation the cedant company pays out to
its customers if there is an accident or disaster.
By sharing the cost of compensation, insurance companies can survive the financial losses from a large-
scale event. The re-insurance market ensures that insurance companies survive through difficult times by
sharing risks and costs.
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DOUBLE INSURANCE
Imagine a situation where both you and your wife hold insurance for your house at the same time. You're
not trying to cheat the insurance companies, but you've decided to have two policies on the same
property so that you can be guaranteed to get some form of compensation. After all, if one company
hesitates in paying out, then you can turn to the other for compensation. This is called double insurance.
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Voyage policy is one of the types of marine insurance policies. Voyage policy refers to policy issued for a
specific passage from departure location to the destination location. It is applicable where subject matter
is the cargo. Here, the risk arises when the ship leaves the departure port and covers the cargo even
when it is located at intermediate places. For example a voyage policy from Bombay port to Hong Kong
port.
Voyage policies are commonly used by exporters who need marine shipping only occasionally or for
relatively small amounts of cargo. Large exporters who ship by sea routinely tend to prefer open cover
marine insurance, which covers all cargo shipped by the policyholder for a specified time period. A voyage
policy is in effect only while the ship is at sea and additional insurance is needed to cover losses during
loading and unloading of cargo.
A voyage policy covers unforeseen risks but not preventable risks. For a voyage policy to be valid the
vessel transporting the cargo must be in good condition and capable of making the journey, and the
vessel's crew must be competent. Voyage policies generally cover against accidental damage and
collisions as well as natural disasters. Losses due to delays may be covered as well. Voyage policies may
specifically exclude losses caused by wilful misconduct, ordinary leakage, ordinary wear and tear,
improper or inadequate packaging, and labour strikes. Acts of war and terrorist activity also are usually
excluded.
The policyholder may need to purchase additional insurance to cover the cargo during the entire
transport process as voyage policies typically exclude losses that occur during the loading and unloading
of the cargo.
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Social insurance vs Commercial Insurance
Social insurance is fundamentally differ from Commercial Insurance. The main differences are as
follows:-
1. Commercial insurance is necessarily voluntary, whereas social insurance is generally compulsory.
2. In commercial insurance, the policy benefits are according to the premiums paid, while in social
insurance the benefits received by the workers are much larger than their contributions.
3. The inspiring motive of social insurance is the maintenance of minimum standard of living whereas
commercial insurance does not aim at providing a minimum standard of living.
4. Moreover, while commercial insurance provides against an individual‘s risk only, Social Insurance is
undertaken to meet a chain of contingencies of diverse nature and intensity.
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Insurable interest is a type of investment that protects anything subject to a financial loss. A person or
entity has an insurable interest in an item, event or action when the damage or loss of the object would
cause a financial loss or other hardships. To have an insurable interest a person or entity would take out
an insurance policy protecting the person, item, or event in question. The insurance policy would mitigate
the risk of loss if something happens to the asset like becoming damaged or lost.
Insurable interest is an essential requirement for issuing an insurance policy that makes the entity or
event legal, valid and protected against intentionally harmful acts. People not subject to financial loss do
not have an insurable interest. Therefore a person or entity cannot purchase an insurance policy to cover
themselves if they are not actually subject to the risk of financial loss.
State laws can differ, however, generally the following individuals would be considered having an
insurable interest in your life.
1. Yourself
2. Your spouse or former spouse
3. Your children or grandchildren
4. A special needs adult child
5. An aging parent(s)
6. An employer (under certain arrangements)
Prior to offering coverage, the insurer will take steps to verify insurable interest. These steps may include
requesting identification from the involved parties and will also likely involve a phone interview, where
the insurer inquires about relationships and insurable interest. If you are unable to prove insurable
interest, the insurer may not issue the insurance policy.
The various Motor Insurance policies are:-
1. Third Party Car Insurance Policy- As per the Motor Vehicles Act of 2019, it is mandatory to avail a
Third Party Cover. Without it, you will be driving your car unlawfully on the road and would result
in a penalty and/or fine. This cover offers
coverage against legal liability caused to a third party due to your car or vehicle. In simple terms,
Third Party insurance covers injury or death caused to a third person by your vehicle along with
damage caused to a property. Here‘s one interesting feature of the cover. As per the Motor
Vehicles Act, the claimant is not obliged to prove negligence of the driver that was responsible for
the accident. As the name suggests, Third Party Insurance only covers third party liabilities. It does
not cover damage to your vehicle or theft. Considering the nature of the cover, the premium is
also low.
2. Own Damage Car Insurance Policy- An Own Damage car insurance policy helps you stay covered
against the damages caused to your car due to accidents like fire, theft, etc. In case of an accident,
an own damage cover compensates you for expense to repair or replace parts of your car
damaged in the accident. This policy covers the cost of damages to your car due to- Natural
calamities like floods, earthquake, fire and more Man-made calamities like vandalism, riots and
terror attacks Damage to your car or the belongings in the car in case of an accident Theft or
malicious acts.
3. Comprehensive Car Insurance Policy- With comprehensive car insurance, you get the benefits of
Third Party Liability cover along with Own Damage coverage. As the name indicates, it offers in-
depth, end-to-end protection for you and your car. The key feature of this insurance is that it
covers theft of the car in addition to damage due to a number of reasons. If you have this cover
and your car gets stolen, you can breathe easy knowing the fact that it will be covered.
Comprehensive insurance covers a number of perils such as vandalism, fire damage, floods,
damage due to natural calamities like tornado, wind storm etc., glass breakage (e.g. windshield),
and damage due to falling object and so on. You can also amplify your protection with add-on
covers such as Personal Accident cover, Electrical Appliances cover, Zero Depreciation cover and
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much more.
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History of Insurance in India
The history of insurance in India dates back to ancient times, with references found in the writings of Manu
(Manusmriti), Kautilya (Arthashastra), and Yagnavalkya (Dharmasastra). However, modern insurance practices
in India began in the 19th century.
Key Milestones in the History of Insurance in India:
 1818: The Oriental Life Insurance Company was established in Calcutta, marking the beginning of the
life insurance business in India. However, the company failed in 1834.
 1829: The Madras Equitable was established in the Madras Presidency, becoming the first successful
life insurance company in India.
 1870: The British Insurance Act was enacted, regulating the insurance industry in India.
 1871-1897: Several foreign insurance companies, such as the Albert Life Assurance, Liverpool and
London Globe Insurance, and Royal Insurance, entered the Indian market, creating competition for
Indian insurers.
 1912: The Indian Life Assurance Companies Act was passed, providing further regulation for the life
insurance industry in India.
 1928: The Insurance Act was passed, consolidating and amending the various insurance laws in India.
 1956: The Life Insurance Corporation of India (LIC) was established, nationalizing the life insurance
industry in India.
 1999: The Insurance Regulatory and Development Authority (IRDA) was established, regulating the
insurance industry in India.
 2000: The Insurance Act was amended to allow private sector participation in the insurance industry.
Since then, the insurance industry in India has grown significantly, with numerous private sector companies
entering the market and offering a wide range of insurance products.
Establishment of the Insurance Industry
The life insurance business in India was introduced in 1818 with the establishment of the Oriental Life
Insurance Company in Calcutta. However, this company failed in 1834. The Madras Equitable began transacting
life insurance business in the Madras Presidency in 1829.
The British Insurance Act was enacted in 1870, which provided a regulatory framework for the insurance
industry in India. During the last thirty years of the nineteenth century, several other insurance companies
were established, including the Bombay Mutual (1871), the Indian Life Assurance Company (1874), and the
National Insurance Company (1891).
In 1912, the Indian Life Assurance Companies Act was passed, which further regulated the life insurance
industry in India. This act required life insurance companies to maintain reserves and submit annual reports to
the government.
The General Insurance Business Act was passed in 1972, which nationalized the general insurance industry in
India. This act transferred the ownership and management of general insurance companies to the government.
The Insurance Regulatory and Development Authority (IRDA) was established in 1999 as an independent
regulatory body for the insurance industry in India. The IRDA is responsible for regulating and developing the
insurance industry, protecting the interests of policyholders, and promoting fair competition among insurance
companies.
Today, the insurance industry in India is a thriving sector with a wide range of insurance products and services
available to meet the needs of individuals and businesses.
Nationalization of Insurance Business: Amid allegations of unfair trade practices, the government of India
decided to nationalize the insurance business.
On January 19, 1956, the Life Insurance sector was nationalized, and the Life Insurance Corporation (LIC) was
established in the same year. LIC absorbed 154 Indian, 16 non-Indian insurers, and 75 provident societies,
totaling 245 Indian and foreign insurers. LIC held a monopoly until the late 1990s when the insurance sector
was reopened to the private sector.
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A Few Exclusions from the Perils of Sea Under Marine Insurance Plans
While "perils of the sea" can offer significant protection for maritime ventures, it is crucial to understand the
exclusions that limit its coverage. These are events deemed outside the realm of unforeseen and unavoidable
natural forces, often attributed to human actions or inherent qualities of the cargo.
Here are some common exclusions:
 Inherent vice: Deterioration or spoilage of cargo solely due to its inherent nature, properties, or
chemical reactions is not covered. This includes perishables expiring or unstable materials reacting
dangerously.
 Negligence: Damage caused by the captain's or crew's errors in judgement, faulty navigation, or
improper operation of the vessel is generally excluded.
 Wear and tear: Gradual damage or loss of value due to ordinary wear and tear during the voyage is not
covered.
 War and related events: Losses caused by war, piracy, strikes, riots, or civil unrest are typically excluded
from the perils of sea coverage.
 Consequential losses: Indirect or financial losses, such as delay in delivery, loss of market, or loss of
profits, are often not covered.
 Infestation and vermin damage: Losses caused by pests like rats or insects attacking the cargo are
typically excluded.
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Subrogation is a legal concept commonly found in many types of insurance, but when it comes to life
insurance, the application is quite limited and often misunderstood. Subrogation in insurance allows the
insurer to step into the shoes of the insured and recover funds from a third party that may be responsible for
the loss. However, in life insurance, subrogation rarely comes into play due to the unique nature of the policies,
which are tied to the life of the insured.
In simpler terms, subrogation ensures that the insurer does not pay twice for the same claim if another party is
at fault. In life insurance, this principle may surface under specific conditions. The purpose of this article is to
explain the meaning and nuances of subrogation in life insurance, addressing how and why it may apply.
Example
 If a policyholder's car is damaged in an accident by another driver, the insurance company can use
subrogation to recover the cost of repairs from the at-fault driver's insurance company.
 If a health insurance policyholder is injured in an accident, the insurance company can use subrogation
to recover the cost of medical bills from the at-fault party.
How it works
Subrogation is a legal process that allows one party to stand in place of another party for legal purposes. It's a
key concept in the insurance industry that helps ensure the responsible party is held accountable.
Subrogation process
The subrogation process can take weeks, months, or years to complete. The insured can waive the right of
subrogation, but in such cases, the premium can be higher.
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Burglary Insurance is a type of insurance that provides coverage for loss or damage to property caused by
burglary or housebreaking. It also includes coverage for damages to premises or locks resulting from burglary
attempts. The insurance company agrees to indemnify the insured for the value of the lost or damaged
property, up to the specified sum insured. This type of insurance is particularly important for safeguarding
against the financial impact of theft-related losses. It's like having a safety net for your property in case of
unwanted intrusions. The following are the coverages found under Burglary Insurance
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 Loss or damage to the property belonging to the business of the insured due to theft, with the
company indemnifying the amount of loss suffered.
 Coverage for any new items purchased by the insured within the insured premises.
 Coverage for damage caused to the premises/locks resulting from burglary and/or house-breaking.
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Crop Insurance: Crop or Agriculture Insurance covers risks of anticipated loss in yield of various crops.
Almost the entire of Crop Insurance business comes from ‘Schemes’ or ‘Programme’. These Schemes
operate on principles of ‘Area Approach’. Coverage is compulsory for farmers taking crop loans from rural
financial institutions (RFIs) for cultivation of crops, i.e., loanee farmers. Non-loanee farmers can also insure
their crops under the same schemes.
Objective of the Scheme
 Providing financial support to farmers suffering crop loss/damage arising out of unforeseen events like
natural calamities.
 Encouraging farmers to adopt innovative and modern agricultural practices.
 Stabilizing the income of farmers to ensure their continuance in farming.
 Ensuring flow of credit to the agriculture sector, which will contribute to food security, crop
diversification and enhancing growth and protecting farmers from production risks
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Home insurance is a type of insurance that protects your home, its furnishings, and valuable items from a wide
range of man-made or natural disasters. Typically, it includes coverage for damages to the home's exterior and
interior, as well as for injuries that occur on the insured property. Providing protection for your home,
belongings, and potential liabilities, home insurance ensures both peace of mind and financial security.
 Protection from Natural Calamities : There have been increased instances of flooding, earthquake,
storm in our cities that have caused damages to many homes. The best way to protect your home from
financial impact of these natural calamities is a home insurance policy.
 Protection from Man-Made Calamities : Protect your home from all kind of man-made calamities
including robbery, riots, malicious activities, theft & burglary.
 Protecting the contents of your home: The gadget you carefully pick out, any art that adorns the walls,
the television your family gathers around – protect them all with a home insurance plan.
 Protect you against Personal Accidents: Home Insurance also provide personal accident coverage in
case injuries occurred while on the insured home.
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