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Understanding Insurance Basics

The document discusses insurance, including its meaning as a contract where one party agrees to pay another party in the event of certain occurrences. It then covers the main functions of insurance like risk protection and investment. The document categorizes insurance into general insurance, which covers areas like health and property, and life insurance. It concludes by outlining the significance of insurance, such as providing security, generating employment, promoting trade, and speeding economic development.

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Shelly Gupta
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145 views13 pages

Understanding Insurance Basics

The document discusses insurance, including its meaning as a contract where one party agrees to pay another party in the event of certain occurrences. It then covers the main functions of insurance like risk protection and investment. The document categorizes insurance into general insurance, which covers areas like health and property, and life insurance. It concludes by outlining the significance of insurance, such as providing security, generating employment, promoting trade, and speeding economic development.

Uploaded by

Shelly Gupta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Contents

 Meaning of Insurance
 Why Insurance?
 Functions of Insurance
 classification of Insurance
 Significance of Insurance
Insurance
Meaning
Insurance is actually a contract between 2 parties
whereby one party called insurer undertakes in
exchange for a fixed sum called premium to pay the
other party happening of a certain event.

It is a contract, represented by a policy, in which an


individual or entity receives financial protection or
reimbursement against losses from an insurance
company. The company pools clients' risks to make
payments more affordable for the insured.
Insurance policies are used to hedge against the risk of
financial losses, both big and small, that may result from
damage to the insured or her property, or from liability
for damage or injury caused to a third party.
Why Insurance?
To provide security

Old age pensions

As an investment / or saving
mechanism

As a collateral for loans

For tax benefits


Functions of insurance
• Provide protection
• Collective bearing of risk
Primary • Provide certainty
Functions

• Provide prevention of losses


• Small capital to cover larger risk
Secondary • Contributes towards the development of larger industries
Functions

• Means of savings and investment


• Sources of earning foreign exchange
Other • Risk free trade
Functions
Classification of Insurance
General insurance
General Insurance is basically an insurance
policy that protects against losses and damages
other than those covered by life insurance.
Motor
insurance

Types of
Marine
insurance General Fire
insurance
Insurance

Health
insurance
Life Insurance
Life insurance is a contract between an insurer
and a policyholder in which the insurer
guarantees payment of a death benefit to named
beneficiaries upon the death of the insured.
Significance of Insurance
Concentration • Insurance help businessmen to concentrate their
on Business attention on business issues, as their risks are
undertaken by the insurance company.
Issues

Generation of • Insurance companies provide a lot of employment in


Employment the economy. This is due to the ever growing business
done by insurance companies.
Opportunities

• There are many risks in foreign trade much more


Promotion of than involved in home trade. Insurance of risks
Foreign Trade involved in foreign trade gives a boost to it volume,
which is a healthy feature of economic development.
Feeling of • Life insurance provides a feeling of economic
Security to security to the dependents of the insured, on
whose life insurance is affected
Dependents

• Life insurance also provides for policies in respect


of education of children, marriage of children etc.
Social Welfare Such special policies provide a sense of security to
the poor who take these policies.

Speeding Up • Insurance companies mobilize the savings of


the Process of community through collection of premiums, and
invest these savings in productive channels. This
Economic process speeds up economic development.
Development Example - LIC

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