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Insurance is the process settlement of loss of few due to any unfortunate and can be shared among the owners of similar assets.
The asses may be inform of Physical like a car or a building may be non-physical like name and goodwill or may be a personal like eye’s damage, libs and other body parts. This chance of loss is called a risk or peril.
To overcome of loss due to misshapen one can insured himself by taking scheme suitable for them and pay premium policy.
Risk can be of two form
- Primary burden of risk
- Secondary burden of risk
Risk retention : those who bear the risk by itself is called risk retention. In this the owner has to bear the loss for the damage.
Risk reduction and control: those who take steps and can transfer his risk to other (insurance company) and can reduce the degree of loss are called Loss reduction or loss prevention.
Insurance involves four aspects
- an asset
- The risk insured against
- The principle of pooling
- The contract
The asset – Human life values(HLV) it’s a kind of property or asset that one earns an income. Suppose that one person is earning Rs 12,00,000 per year and he spend Rs 2,40000 on himself. The net earning his family would lose after his death would be Rs 12,00,000 – Rs 2,40000 =9,60000
Insurance contract : its an agrees to provide financial protection against certain specified risks for a price know as the premium.
A contract is an agreement between two parties , viz., the company, called the insurer, and the policy holder, called the insured and fulfills the requirement enshrined in the Indian contract Act, 1872.
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“Consensus ad-idem” both the parties should agree to the same thing in the same sense i.e both the insurance company and the policyholder must agree on the same thing in the same sense.
Coercion – involves pressure applied through criminal means.
Under influence – when a person who is able to dominate the will of another, user her position to obtain as undue advantage over the other.
Fraud – when a person induces another to act on a false belief that in caused bya representation he or she does not believe to be true. It can arise either from deliberate concealment of facts or through misrepresenting them.
Mistake – error in one’s knowledge or belief or interpretation of a thing or event. This can leas to an error in understanding and agreement about the subject matter of contract.