Insurance Law

KRISHNA INSTITUTE OF LAW
(Approved by BCI affiliated to CCSU, Meerut)

NH-24, Jindal Nagar, Ghaziabad-201002
Phone no- +9643031960, 9643028427
LAW OF INSURANCE
An Introduction: Insurance may be described as a social device to reduce or
eliminate risks or loss to life and property. It is a provision which a prudent
man makes against inevitable contingencies, loss or misfortune.
Insurance provides financial protection against a loss arising out of
happening of an uncertain event. A person can avail this protection by
paying premium to an insurance company.
A pool is created through contributions made by persons seeking to protect
themselves from common risk. Premium is collected by insurance
companies which also act as trustee to the pool. Any loss to the insured in
case of happening of an uncertain event is paid out of this pool Insurance
works on the basic principle of risk-sharing. A great advantage of insurance is
that it spreads the risk of a few people over a large group of people exposed to
risk of similar type.
DEFINITION
Insurance is a contract between two parties whereby one party agrees to
undertake the risk of another in exchange for consideration known as
premium and promises to pay a fixed sum of money to the other party on
happening of an uncertain event (death) or after the expiry of a certain
period in case of life insurance or to indemnify the other party on
happening of an uncertain event in case of general insurance.
The party bearing the risk is known as the ‘insurer’ or the ‘assurer’ and the
party whose risk is covered is known as the ‘insured’ or ‘assured’.
Risk - The concept is closely related to an uncertainty. Risk is defined as an
uncertainty, related to the occurrence of a loss. Important features of risk
are-
1. unpredictable,
2. uncertainty about the future event,
3. deviation from desired outcome &
4. not favorable.
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In a competitive economy, risk bearing is essential. Since every one of us is

exposed to some or other risk, the best way is to accept the presence of risk
and manage the affairs without being affected.
Advantages of Insurance:
 Losses if occurred are compensated by insurer.
 Uncertainty is reduced and business can be transacted without having the
fear of losing its infrastructure and capabilities.
 Insurance premium is business expenditure. It reduces your income as
well as income tax liability.
 In the case of certain insurances, especially in the nature of life insurance,
mediclaim insurance etc.,( income tax concessions are available.)
 You can also avail certain value added services from insurer like loss
control advice, exposure analysis, etc.
 It is one of the techniques of risk management process.
 It reduces the fear and anxiety in the mind of an individual and also a
business unit.
 It is compensatory in nature. It restores the insured position.
 When property or person is brought the umbrella of insurance cover, it
adds to the credit worthiness.
Fundamental Principles of a insurance contract
 INDEMNITY : A contract of insurance is a type of contract of indemnity in
which an insurer contract with the insured to mitigate any monitory loss
held to the insured on happening of some event as mentioned in the
contract.
It is necessary that some monitory or pecuniary loss happen to the
insured due to happening of some event.
The insured is not permitted to make profit from the insurance. Example
Mr. X taken a policy to insure his car against theft and accident of Rs. 1,
00,000. He got the accident and damage cost is of Rs. 10000. Then the
insurance company will allow his claim up to Rs. 10000 only. In case his
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car has been stolen then they may claim maximum claim of Rs. 100000 in
case of total loss.
 GOOD FAITH; The contract of insurance must be on good faith. The
insured is of the obligation to declare full and true disclosure of facts to
the insurer. The insurance company on the facts declared by the insured
will decide the type of insurance and the liability and as well as the
premium. So the true disclosure of all facts is necessary. The insurance
company may declare any contract as void, if later found that the facts
declared by the insured are not true.
A new material fact , which is not material at the time of entering into the
contract but later it became material during the course of time on the
basis of which the insurer may declare the contract void or not ready to
renew the contract , should be declare by the insured to the insurer as
soon as he came to know the fact.
Any material facts comes in the knowledge of the insured subsequently
need not to be disclosed.
 INSURABLE INTEREST; it is some monitory or pecuniary interest. A
person is said to have an insurable interest when he is so situated with
regard to thing insured that he would have benefit from its existence and
loss from its destruction.
The insured must has insurable interest in every contract of insurance
with respect of any object or life.
A factory owner has insurable interest in the factory or if a person has a
car has insurable interest in the car. Suppose Mr. A has car and the car
cannot insured by Mr. B, since Mr. B has no insurable interest in Mr. A’s
car.
The insurable interest of a husband will be in the life of his own and his
wife or wife has insurable interest in the life of her own or his husband in
case of life insurance policies. The insurable interest must be pecuniary
interest.
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 CAUSA PROXIMA; i.e. the “proximate cause” this is applicable in case of

fire insurance. In these cases when damage has resulted due to two or
more causes, we have to look to the proximate or the nearest cause of
damage, although the damage might have not been taken without remote
cause. In the case of loss the proximate cause should be considered not the
remote cause. If the cause of the loss is the peril as mentioned in the
contract then the insured will get the claim otherwise not.
As held in case of Pink v. Fleming (1899) lord Esher observed, In the
above case the ship collided with another ship, resulting in delay and
mishandling of cargo of oranges which deterioted. It was held that the
deteriotion of oranges was not due to collision of ships (peril insured) but
that was due to mishandling and improper storage.
 MITIGATION OF LOSS; it is an important principal of insurance, that in
case of peril or accident the insured must try his best to save insured
interest in the property or life. That he must take all measures to minimise
the loss that he would have taken if the property were uninsured.
 RISK MUST ATTACH; the risk must attached i.e. the insurer receives the
premium in a contract of insurance for running a certain risk. If the risk is
not run or not continuous on the business or the property of the insured
then the premium received by the insurer should be returned.
 SUBROGATION: it applies in case of fire policies. Subrogation is a right of
the insurers to enforce for their own benefit all the rights and remedies
which the insured posses against third parties in respect of subject matter.
Subrogation is thus the substitution of one person in place of another in
relation to the claim, its rights, remedies or securities.
Suppose two ships were insured and belong to Mr. X and Mr. Y, they have
collided and Mr. X received insurance claim from insurance company.
Now in this case insurance company may sue Mr. Y for negligence and
claim for damages.
 CONTRIBUTION: Where a particular property is insured with two or
more insurers against the same risk, it is called “double insurance”. In the
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event of loss, the insured will get compensation only for the amount of
actual loss. He will compensated by the concerned companies on the basis
of “principal of contribution”. The insurers must share the claim to the
extent sum insured with them. If in this case whole loss is paid by one
insurer then it is entitled to demand contribution from other insurers.
Classification of Insurance
There are two type of insurance namely life and non-life insurance. In life
insurance, the protection is given for the life of a human being while in the
case of General (non-life) insurance the protection is extended for assets and
properties.
LIFE INSURANCE GENERAL INSURANCE
This is not a contract of This is essentially an arrangement of

indemnity. indemnity
Because it is very difficult to It is easy to ascertain the economic value
ascertain the financial or of an asset.
monetary value of human life.
Intention may be Risk cover and Intention is only to cover the risk.
or savings.
It is life time contract. It is yearly contract, subject to renewal.
Death is certain, only timing is Event is totally uncertain.
uncertain.
Earning capacity of the insured Economic value of asset is relevant.
is relevant.
Premium is based on sum It is not relevant.
insured, age at the time of entry.
Premium is calculated with Premium is calculated with reference to
reference to mortality table. experience of past losses, probable risk
factors and fixed tariff plans.
Features or Element of Insurance Contract

 Offer- Insurance offer is made mostly in the shape of proposal form.
 Acceptance- As per provisions of the Insurance Act, 1938, the acceptance
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is subject to payment of premium.

 Free consent- Mere consent is not sufficient for an Insurance contract. It
means that the person to whom offer was made has understood that, full
and correct disclosure of all the material facts has been made to him and
then he has taken a decision to accept the offer without being compelled
by other person. Such consent is called as free consent. In absence of this
free consent, the party to a contract may repudiate the same.
 Consideration- consideration means “something in return”, in simple words

something must pass on from each party to another. In terms of Insurance
contract, premium is paid by the insured to insurer. In return, insurer
gives a promise to compensate the insured at the happening of some
event. In fact in practice, the insurance protection starts only when the
premium is paid. As per section 64 VB of the Insurance Act, prior
payment of premium is mandatory for getting the insurance cover.
 Competency of the parties- competency should not be confused with

capability. Under Indian contract Act, a person is said to be competent to
enter contract with other person if, he has attained the age of majority
i.e., he is not minor, not of unsound mind and not disqualified from
entering into contract due to any legal provision or law of the land.
 Lawful object- The subject matter of the Insurance contract must be for a
lawful purpose. The contract is said to be lawful unless:
 It is forbidden by law,
 Is fraudulent,
 It is of such nature that if permitted, would defeat the provisions and
intention of the law or court regards this as an immoral or is opposed
to public policy.
 Eg: The goods which are smuggled or stolen cannot be insured.
 Other legal formalities- The contract otherwise complete and valid in all
other aspect must also comply with any other formalities. Eg - All policy
documents must be duly stamped in accordance with the provisions of
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the Indian stamp Act.

Insurance is a contract
“A contract is an agreement which is enforceable by law.” So we can say
that:
AGREEMENT+ ENFORCEABILITY= CONTRACT
Enforceability means, if one of the parties violates the terms and

conditions, the other party has a right to take a legal action.Thus a contract
essentially creates a set of mutual rights and obligations between the parties,
if one of the parties fails to fulfill his obligation, under a contract, the contract
is said to be breached. In such circumstance, the other party may knock the
doors of court and ask for relief.
SOCIAL INSURANCE
Social insurance has been developed to provide economic security to
weaker sections of the society who are unable to pay the premium for
adequate insurance.
Types of Social Insurance-
 Sickness Insurance: In this type of insurance medical benefits, medicines
and reimbursement of pay during the sickness period, etc. are given to
the insured person who fell sick. The subsidiary companies of General
insurance corporation issue” Medi-claim” policies for this purpose.
 Death Insurance: Economic assistance is provided to dependents of the

assured in case of death during employment. The employer can transfer
his liability by getting insurance policy against employees.
Insurable Interest
Basically insurance is a cover or protection against the losses that may arise
from a risk. Risk is treated as Insurable when it is capable of financial
measurement, actual/ statistical estimation of that. Insurable Interest in
general it means that the policy holder must have a pecuniary or monetary
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interest in the subject matter of Insurance. In damage or loss to the subject

matter must result in financial loss to the polcy holder. Thus, there has to be
presence of a property, interest, right, life, or a potential liability, which is
capable of being insured.
The presence of pecuniary interest is not applicable in the case of life

Insurance.Thus in the following cases of life Insurance,insurable interest
need not be established.
 Own life.
 Spouse life.
 Children’s life.
In the following cases of life insurance, the extent of insurable interest/
monetary interest must be proved-
 Policies taken by employer in respect of employees.
 Insurance taken by a creditor for the life of his debtor.
 Insurance taken by a partner of a firm for the life of another partner.
 Insurance taken by a Guarantor or a surety for the life of a debtor.
INSURABLE INTEREST; it is some monitory or pecuniary interest. A person
is said to have an insurable interest when he is so situated with regard to
thing insured that he would have benefit from its existence and loss from its
destruction. The insured must has insurable interest in every contract of
insurance with respect of any object or life.
Example - A factory owner has insurable interest in the factory or if a person
has a car has insurable interest in the car. Suppose Mr. A has car and the car
cannot insured by Mr. B, since Mr. B has no insurable interest in Mr. A’s car.
The insurable interest of a husband will be in the life of his own and his wife
or wife has insurable interest in the life of her own or his husband in case of
life insurance policies. The insurable interest must be pecuniary interest.
Principle of insurable Interest
1. Financial measurement.
2. Statistical (actuarial) estimation
3. There must be sufficient number of similar risks for rating purpose.
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4. The subject matter of the contract must not be against public policy.
5. The premium must be reasonable.
6. There must be insurable interest in the property to be insured/risk to
be covered.
Essential of Insurable Interest
1. There must be right, interest, life, limb or potential liability capable of
being insured.
2. The insured must stand in a relationship with the subject matter of
insurance.
3. It is this property, right, interest, etc., which must be the subject matter
of insurance.
4. This relation between the insured and the subject matter of insurance
must be recognised in law.
Creation of Insurable Interest – there are a number of ways in which
insurable interest may arise or be limited.
a. By common Law – where the essential elements of insurable interest
are automatically present, the same can be described as having arisen
at common law.
b. By contract – in some contracts a person may agree to be liable for
something, which he would not ordinarily be liable for.
c. By statue – sometimes an Act of the Legislature will create an insurable
interest either by granting some benefit or imposing a duty. While the
statue may create insurable interest where none would otherwise exist,
there can be statues, which restrict liability and thereby also restrict
insurable interest.
Instances of insurable interest in life business
1. Own life – it is presumed that a person has insurable interest in his
own life to an unlimited extent.
2. Life of Spouse – Spouse have insurable interest in each other.
3. Life of employees – employers have insurable interest in the life of
employees, so long as the employment contract continues.
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4. Life of children – it is presumed that parents have insurable interest in

the life of a child as a child i.e., so long as he is child.
Principle of Indemnity
A contract of insurance contained in a fire, marine, burglary or any other
policy (except Life assurance and personal accident and sickness insurance)
is a contract of indemnity. This means that the insured, in case of loss against
which the policy has been issued, shall be paid the actual amount of loss not
exceeding the amount of the policy, i.e. he shall be fully indemnified. The
maximum amount of compensation does not exceed the amount of actual
loss or the value of the policy whichever is less. The object of every contract
of insurance is to place the insured in the same financial position, as nearly
as possible, after the loss, as if the loss had not taken place at all. It would be
against public policy to allow an insured to make a profit out of his loss
damage.
The principle of indemnity does not apply to life insurance and other
personal accident insurance because loss of one individual life cannot be
measured in terms of money. Under the contract of life insurance, a fixed
sum is agreed to be paid either on the expiry of a certain period or on the
death of the insured. In another word the intention of this principle is to
compensate and restore the insured and nothing more.
Main features of the principle of indemnity-
 All contracts of insurance except the life insurance and personal
accident insurance are contracts of indemnity.
 The amount of indemnity should not exceed the amount of actual loss
or the value of the policy whichever is lower.
 The marine insurance is not a pure indemnity contract.
 The doctrine of subrogation is applied after the settlement of the
claims.
 Valued policies except marine insurance are not covered under the
scope of the principle of indemnity.
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Objectives of indemnity-
The objective of the principle is to place the insured, as far as possible, in the
same financial position after a loss, as that occupied by him, immediately
before the loss.
In simple words, the principle of indemnity means the insured is indemnified
only to the extent of his loss, no profit or undue benefit is extended. The
indemnity is subject to the sum insured and other terms of the policy. The
sum insured can be fixed on the basis of Reinstatement Value or Market
Value.
Method of Indemnity
 Cash payment (most popular way)
 Replacement (Replacement of article itself/ no payment)
 Repairing of the article to the satisfaction of the insured, it is common
in motor car, motor cycle, scooter etc.
 Re-installment/Reconstruction (followed in fire insurance)
Once the insured is indemnified by any method, the insured is required to
surrender all his rights relating to the loss or damages to the insurer.
DOUBLE INSURANCE AND REINSURANCE
Double insurance refers to the method of getting insurance of same subject
matter with more than one insurer or same insurer under different polices.
Double insurance is possible in all type of insurance contracts. A person can
insure his life in different policies for different sums.
In life insurance the assured can claim the sum assured with different polices
on the maturity or to his nominee after his death. This is possible in life
insurance because life insurance is not indemnity insurance.
In indemnity insurance such as fire and marine, only the real loss can be
claimed by the insured or only the actual loss can be indemnified. In other
words, the total claim cannot be exceeded the real loss, payable
proportionate by each insurer. If any one of the insurers pays more than his
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shares, he is entitled to a contribution from other insurers.

In case the total loss is less than the value of insurance policies issued by the
different insurance companies, the insured can claim in full against all the
policies.
Features of Double insurance
 More than one policy can be obtained against the same subject matter
(life).
 All the policies relate to the same subject matter.
 The risk covered in all the policies is the same.
 The risk in all the policies is of the same period.
 The insured has equal insurable interest in the subject matter.
 The policies can be obtained either from the same insurer or from
different insurers.
 Double insurance is beneficial in life insurance only.
 In case of life insurance, the money from all the policies can be claimed
by the assured or his nominee.
One can get insurance policies issued on a subject matter more than its value.
REINSURANCE
It is a contract between two or more companies by which a portion of risk of
loss is transferred to another insurance company. This happens when an
insurance company has undertaken more risk burden on its shoulders than
its bearing capacity. Double insurance is, thus, a device to reduce the risk. By
transferring the risk to any other insurance company, the insurer reduces his
liability. Reinsurance does not affect the contract between the original
insurer and the assured. Reinsurance can be restored in all types of
insurance contracts.
Characteristics of Reinsurance:-
 It is an insurance contract between two insurance companies.
 In reinsurance, the insurer transfers the risk beyond the limit of his
capacity to another insurance company.
 The relationship of the assured remains with the original insurer only.
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 It is a contract of indemnity.
 It does not affect the right of assured.
 The fundamental principles of insurance are applicable in re-insurance
also.
 The original insurer cannot do re-insurance more than the insured sum.
 Re-insurer is bound only to those liabilities for which the original
insurer is legally liable.
Re-insurance can be possible in all types of insurance.
Life insurance
Life insurance may be defined as a contract in which the insurer, in
consideration of a certain premium, either in a lump sum or by other
periodical payments, agrees to pay the assured, or to the person for whose
benefit the policy is taken, the assured sum of money, on happening of a
specified event contingent on the human life.
In another word Life insurance is a corporate effort to provide security
against economic hazards of man. It is a contract between the insurer and
the insured to pay a stated sum of money, for a consideration in the form of
premium, on happening of any future event on the life of the assured.
Characteristics of life insurance
 It is a contract between the insurer and insured.
 Insurance of human hazards is covered by life insurance policy.
 It is a promise to pay the money insured in consideration to a
premium.
 The insurance premium is sometimes paid at a lump sum together or
periodically.
 A default in remitting the premium may cause discharge of the
insurance contract and the insurer shall be relieved from his liability.
 The money insured is paid by the insurer to the insured or assignee on
happening of the event specified in the policy.
 The proposal for affecting an insurance policy is executed in the
prescribed form.
 The policy is signed by the insurer only.
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Settlement of death claim

The facts required to the submitted by the claimant are :
(a) Date of death
(b) Reason and Place of Death and
(c) Full details of policies held by the Life assured should also be submitted.
Death claims are categorised as Non-Early Death claims and Early Claim
(A) Non-early Death Claims refer to death of the Life assured occurring
after 3 years from the date of commencement of policy or Date of last
revival/reinstatement. If the policy is in force till death by regular
payment of premiums, full sum assured is payable along with bonus (if it
is with a profit policy). The requirements for the settlement of the death
claim are-
1. Policy Document
2. Death Certificate from the appropriate authority,
3. Legal evidence of Title, if the claimant is not an assignee/nominee
4. Abridged Clam Form
5. Discharge Form duly signed
6. Assignment/Reassignment deed, if any
7. Age proof, if age is not already admitted
(B) Early claims refer to the death of life assured occurring within 3 ye s
from commencement of policy. The following forms are to be submitted duly
completed:
1. Statement from the medical attendants who last treated the deceased
Life assured.
2. Certificate of treatment issured by the hospital authorities where the
deceased was treated last.
3. Certificate by the employer if the deceased was an employee.
4. Certificate of burial/cremation signed by a person who attended the
funeral of the deceased.
The death claim amount is payable to the nominee or the assignee as the case
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may be. If the life assured has died without making an assignment or
nomination, legal evidence of title (proof of ownership) such as succession
certificate or letters of administration or probate of a will where a will exists,
would be required. If the intimation claim is received after 3 years from the
death, the same is time barred. The claimant has to be informed accordingly.
Settlement of Maturity Claims
Maturity claims are-payable as per the terms of the policy. These policies are
generally endowment policies including money back policies. The amount
payable at the time of maturity includes sum assured and
bonuses/incentives. The insurer normally sends advance intimations to the
insured. The insurer has to satisfy that:
1. The life assured is the holder of the policy and his identity is proved.
2. The age stands admitted.
3. The premiums are all paid.
4. The original policy is handed in together with a completed discharge
voucher before making payment.
Documents Required: In the case of maturity claims, the insurer will call for
the following documents, well before the date of maturity
1. Policy document, if it is not available, it may have been deposited
elsewhere as a security for a loan. If policyholder loses the policy, the
claim can be settled on the strength of an indemnity bond from the
policyholder and a reliable surety of sound financial means.
2. Age proof, if the age is not already admitted.
3. Deed of assignment if any.
4. Discharge form issued by the office
Settlement procedure in a Maturity Claim: After receipt of the corn ted
and stamped discharge voucher from the person entitled to the policy
money, along with the policy documents, claim amount will be paid by
account payee or crossed and order cheque. Some notable points regarding
settlement of claims:
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1. If the life assured is reported to have died before the maturity date, the
claim has to be treated as death claim and processed accordingly
2. Under the Evidence Act, a person who has disappeared is presumed to
be dead only if he has not been heard of for seven years. In such cases a
decree of presumption of death from a court of law would be needed.
The premiums must be paid until presumption of death is made
3. If the Life assured had paid at least 3 years' premiums and thereafter if
premiums have not been paid, the nominees get proportionate paid up
value.
4. In the event of the death of the Life assured within 3 years and the
policy is under the lapsed position, nothing is payable
Double Accident Benefit is provided as an inject to the life insurance cover.
For this purpose an extra premium or Rs. 1/-per Rs. 1000/-S.A. is charged.
For claiming the benefits under the Accident 13encfit the claimant has to
produce the proof to the satisfaction of the corporation that the accident is
defined as per the policy conditions.
Compilation of risk in life insurance -
Thinking of people as a whole, some are healthier than others. Within each
age group, the probability of death is greater for some than others. These
differences in risk stem from one’s physical condition, occupation, sex, and
other factors—we’ll get into these more a bit later.
Life insurance companies decide how much your life insurance policy will
cost based on risk factors. The more risk factors you have, the more you pay.
It doesn’t make sense to allow someone with a greater probability of death to
pay the same as someone who likely won’t die for another handful of
decades.
Factors Affecting Risk-
In order for an insurance company to determine what risk class an
applicant is, they rely on evaluating factors that may impact an applicant’s
longevity.
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These risk factors include:

1. Age - Your age is the most important single factor in measuring
probability of death. When you apply, you are placed into the proper
age grouping and then your other risk factors are compared to that of
the norm within your age class.
All insurance companies have a minimum and maximum age range in
which you can be eligible to apply for coverage. Depending on the
company, some maximum ages can be as low as 60 and some as high as
80. Regardless of any other factors, if you apply with a company and are
over their maximum age, they will deem you uninsurable. If you are
younger than their minimum age (typically 18 or 20 years old) you’ll
have to wait until you’re at a proper age.
2. Build - Your build the relationship between your height and weight is
one of the more basic determinants in determining probability of death.
Build charts may vary slightly across life insurance companies, but the
table below is one example.
Sample life insurance build chart for Quotacy blog Height & Weight and
Life Insurance
If you are within an average height/weight range, then your build is a
neutral factor. However, if your height/weight is beyond the average,
then this may cause you to move into a substandard risk class.
3. Physical condition - Life insurance companies will want to know if you
have any impairments of the body or mind that may shorten your life
expectancy. Specific health questions are asked on the application and,
if necessary, medical records are ordered and a medical exam may be
required. The primary purpose of the medical exam is to detect any
malfunctioning of vital organs. A blood test and urinalysis help to
determine this.
Life insurance companies will typically not offer coverage if you are
scheduled for any diagnostic testing or surgery, currently under
treatment for any condition, or have not fully recovered from an illness.
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4. Tobacco use - It’s not a secret that smoking is bad for your health. If
you smoke cigarettes, you’re going to be classified in a Tobacco risk
class and you’re going to pay more for life insurance.
Pipe smoking, chewing tobacco, electronic cigarettes, cigars, smoking
cessation products (e.g. Nicorette gum) and marijuana use are all
viewed a bit differently depending on the insurance company.
Some life insurance companies may qualify you for a non-tobacco risk
class and some may keep you in a tobacco risk class—the more
companies you have access to, the better your chances for a lower
premium. It’s one of the many reasons to work with an independent
agency (like Quotacy) versus a captive agency who only works with one
life insurance.
5. Personal history - Life insurance companies will also want to know if
you use any drugs or drink alcohol. Companies will take a hard look at
any past abuse of drugs or alcohol, as this may have caused irreparable
damage to the body. Any current use of hard drugs will cause an
automatic decline. Marijuana use varies from company to company.
Moderate alcohol use is not concerning, but heavy drinking is. There is
a substantial mortality risk among heavy drinkers.
Personal history may also reveal potentially concerning living or
working environments. For example, if an applicant recently left a
hazardous job, there is a possibility that his or her health was affected.
Life insurance companies also want to know if you currently have a life
insurance policy or have been declined for one in the past. If there is a
current active policy, this affects how much coverage you can be
approved for. If you have been declined in the past, the reason(s) why
may still exist.
6. Family history - Because certain medical conditions are hereditary,
family history plays a role in life insurance as well. When you apply for
life insurance, you are asked about the ages and health status of your
parents and siblings. If any are deceased, the age they died and their
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cause of death will also be asked.

When determining an applicant’s risk class, a very good family history
will be a credit and a very poor family history may be a few points
against your overall evaluation.
7. Occupation - There are jobs which can be considered hazardous and
come with a shortened life expectancy. They may be considered
hazardous because there’s a higher chance of an accident occurring—
for example, construction workers—or it’s an unhealthy working
environment—for example, miners.
All life insurance companies have occupational manuals which list the
occupations deemed to have an adverse effect on mortality. If you work
in one of the listed occupations, you will likely be required to pay a
higher premium.
If you purchase a policy and were paying a higher rate because of your
job, but then change to a less hazardous one, you may ask the life
insurance company for a reconsideration. Depending on the
circumstances, it’s likely they will agree to move you into a better risk
class and decrease your premiums.
8. Residence - Mortality rates vary throughout the world. If you are
contemplating foreign travel or residence, the life insurance company
will want to know when, where, and for how long. They also want to
know if you have recently traveled to or lived in a foreign country. A
particular country’s climate, living standards, sanitary conditions,
medical care, political stability, and terrorist risk can all have an effect
on your mortality.
You can learn more about how life insurance companies evaluate
foreign travel in this blog post: Foreign Travel and Life Insurance.
applicants who are non-U.S. citizens in this blog post: Life Insurance for
Non-US Citizens.
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applicants who are non-U.S. residents in this blog post: Life Insurance
for Non-U.S. Residents.
9. Sex - Statistically speaking, women live longer than men. According to
the Centers for Disease Control and Prevention (CDC), the life
expectancy for women is 4.9 years higher than men.
There are many reasons for this; some of the main ones being that
women, overall, are more health conscious and more willing to see a
doctor when needed. Women also are less prone to risky behavior
compared to men.
Life insurance is all about life expectancy so women pay lower
premiums—except in the state of Montana where they have an
insurance unisex law.
10. Aviation activities - Back in the day, any form of flying was
considered extremely hazardous and most life insurance companies
would either force the applicant to pay an exorbitant amount or they
would add an aviation exclusion clause to the policy, in other words, if
you died as the result of a plane crash, your beneficiaries wouldn’t
receive the death benefit. With technological developments and
improved safety requirements, air travel has become extremely
common and far less risky. Life insurance companies no longer impose
any restrictions to passengers or crew members of airliners; however,
companies will still take a closer look at private pilots and crew
members of military aircraft.
Types of Life Insurance Policies

1. Whole Life Policies: In whole life policies, the insurance cover extends
to whole life of the assured and premium are paid till death. LIC, now a
days settles the payment of sum assured and assured bonuses, if the
assured attains the age of 80
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2. Endowment Policies: An endowment policy is designed primarily to

provide a living benefit and only secondarily to provide life insurance.
Therefore, it is more of an investment than a whole life policy
3. Participating Policies : In participating policies, the profit of die
insurer operation are distributed to the policy holders in the form of
bonuses declared of the every valuation
4. Money Back Policies : It is an endowment policy for which a part of
the sum assured is paid to policyholder in the form of survival benefits,
at fixed intervals, before the maturity date
5. Pension Policies: These are the policies that provide benefits to the
insured only upon retirement. If the insured-dies during the terms of
the policy, his nominee would receive the benefits either as a lump sum
or as a person ever mouth The premiums are paid over a specified
period
6. Annuity Policies: Annuity is a contract that provides an income for a
specified period of time. Annuity schemes are -those wherein
policyholders regular contributions over a period of time (or a one-time
contribution) accumulate. to form a corpus with the insuer.
Surrender value
Definition: It is the amount the policyholder will get from the life insurance
company if he decides to exit the policy before maturity.
Description: A mid-term surrender would result in the policyholder getting
a sum of what has been allocated towards savings and the earnings thereon.
From this will be deducted a surrender charge, which varies from policy to
policy.
A regular premium policy acquires surrender value after the policyholder
has paid the premiums continuously for three years. However, you need to
make sure that you keep track of this policy till it matures. Once you decide
to exit the insurance policy, all the benefits associated with it, including the
protection cover, will cease to exist.
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GENERAL INSURANCE
General insurance means managing risk against financial loss arising due to
fire, marine or miscellaneous events as a result of contingencies, which may
or may not occur.
General insurance means to: cover the risk of the financial loss from any
natural calamities viz. flood, fire, earthquake, burglary etc, i.e. the events
which are beyond the control of the owner the goods for the things having
insurable interest with the utmost good faith by declaring the facts about
the circumstances and the products by paying the stipulated sum, a
premium and not having a motive of making profit from the insurance
contract.
General rules regarding General insurance:-
 In the case of mis-discription, mis-presentation or mis-declaration, or
non- discloser of any material facts the insurance policy shall be void
and the entire premium paid by the insured may be forfeited by the
insurance company.
 The insured is bound to take all reasonable steps to safe guard the
property insured against any loss or damage by observing with all
statuary or other regulations.
 If any claim under the policy may be in any respect fraudulent or if any
fraudulent means are used by the insured to obtain any benefit under
the insurance policy, all the benefits under the insurance policy may
be forfeited.
 The loss or damage or liability or expenses whether direct or indirect
occasion by happening through or arising from any consequences of
war, invasion, act of foreign enemy, civil war, loot and loss or damage
caused by depreciation or wear and tear, will not be covered under
general insurance.
FIRE INSURANCE
Fire insurance is a contract under which the insurer in return for a
consideration (premium) agrees to indemnify the insured for the financial
loss which the later may suffer due to destruction of or damage to property
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or goods, caused by fire, during a specified period.

Generally, a contract of fire insurance is a contract from year to year only
and the insurance automatically comes to an end after the expiry of the
year. But it can be continued for a further period.
In the fire insurance policy, ‘Fire means the production of light and heat by
combustion or burning. Thus, fire, must result from actual ignition and
resulting loss must be proximately caused by such ignition.
The types of losses covered by fire insurance are:--
 Goods spoiled or property damaged by water used to extinguish the
fire.
 Pulling down of adjacent premises by the fire brigade in order to
prevent the progress of flame.
 Breakage of goods in the process of their removal from the building
where fire is raging.
The types of losses not covered by a fire insurance policy are:-
 Loss due to fire caused by earthquake, invasion, act of foreign enemy,
hostilities or war, civil strife, riots mutiny, martial law, military rising.
 Loss caused by subterranean (underground) fire.
 Loss caused by burning of property by border of any public authority.
 Loss by theft during or after the occurrence of fire.
 Loss of damage to property caused by its own fermentation or
spontaneous combustion. E.g. exploding of a bomb due to an inherent
defect in it.
 Loss or damage by lightening or explosion is not covered unless these
cause actual ignition which spread into fire.
A claim for loss by fire must satisfy the following conditions:--
 The loss must be caused by actual fire or ignition and not just by high
temperature.
 The proximate cause of loss should be fire.
 The loss or damage must relate to subject matter of policy.
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 The ignition must be either of the goods or of the premises where goods
are kept.
 The fire must be accidental, not intentional. If the fire is caused through
a malicious or deliberate act of the insured or his agents, the insurer
will not be liable for the loss.
Types of fire insurance
1. Specific policy:- It is a policy which covers the loss up to a specific
amount which is less than the real value of the property. The actual
value of the property is not taken into consideration while
determining the amount of indemnity. Such a policy is not subject to
‘average clause’ Average clause is a clause by which the insured is
called upon to bear a portion of the loss himself. The main object of the
clause is to check under- insurance, to encourage full insurance and to
impress upon the property owners to get their property accurately
valued before insurance. If the insurer has inserted an average clause,
the policy is known as ‘Average policy’.
2. Comprehensive policy:- It is also known as ‘all in one policy’ and
covers risk like fire, theft, burglary, third party risks etc. It may also
cover loss of profits during the period of business remains closed due
to fire.
3. Valued policy:- It is a departure from the contract of indemnity.

Under it the insured can recover a fixed amount agreed to at the time
the policy is taken. In the event of loss, only the fixed amount is
payable, irrespective of the actual amount of loss.
4. Floating policy:- It is a policy which covers loss by fire caused to

property belonging to the same person but located at different places
under a single sum and for one premium. Such a policy might cover
goods lying in two warehouses at two different locations. This policy is
always subject to ‘Average clause’.
5. Replacement or Re-installment policy:- It is a policy in which the

insurer inserts a Re- installment clause, whereby he undertakes to pay
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the cost of replacement of the property damaged or destroyed by fire.

Thus, he may re-instate or replace the property instead of paying cash.
In such a policy, the insurer has to select one of the two alternatives,
i.e. either to pay cash or to replace the property, and afterwards ha
cannot change to the other option.
Non – Life Marine Insurance
Marine insurance is the oldest form of Insurance. In India till 1963, marine
insurance was governed by the provisions of the British Act, the contract Act
and certain provisions of the Insurance Act. The law relating to marine
insurance has been codified by the marine insurance Act, 1963 which came
into force on 1st august 1963.
Marine insurance contract may also be defined as a contract by which the
insurer promises to compensate the insured for all losses incidental to
marine adventure, that may be sustained by the subject-matter insured. The
insured undertakes to pay a certain sum of money called the premium in
consideration of the insurer’s guarantee to make good the losses arising from
certain specific perils which may include “perils of the sea” as well as any
land risks incidental to a sea voyage. The contract is embodied in a document
called the Marine Policy. The insurer is often called ‘the underwriter’ and the
contingency insured against is referred to as “the risk”.
The term ‘perils of the sea’ refers only to accidents or casualties of the sea,
and does not include the ordinary action of the winds and waves. Besides,
marine perils include, fire, war perils, pirates, seizures and jettison etc.
Essentials of a valid marine insurance policy:
 It must fulfill all the essentials of a valid contract
 It must be in writing and duly stamped under the stamp act
 Insured must have insurable interest in the subject matter at the time of
loss
 Time period of insurance must not be more than one year
 Good faith must be observed between the parties
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There are four types of marine insurance

1. Hull insurance: It covers the insurance of the vessel and its
equipment’s. Furniture and fittings, machinery, tools, fuel, etc.It is
affected generally by the owner of the ship. As the ship/vessel/Hull
moves from one part to another and it may be subject to marine perils,
hence insurance is effected against the risks. There are a number of
classification of vessels. As for example, steamers, sailing vessels etc. it
is generally issued for 12 months. Hull policies are also issued to cover
vessels in course of construction.
2. Cargo insurance: It includes the cargo or goods contained in the ship
and the personal belongings of the crew and passengers. When the
goods or cargo transported from the port of departure to the port of
destination, forms the subject matter of insurance, it is called as cargo
insurance. This policy may be arranged for the duration of a voyage or
as a time policies or open policies or on other basis.
3. Freight insurance: It provides protection against the loss of freight. In
many cases, the owner of goods is bound to pay freight, under the
terms of the contract, only when the goods are safely delivered at the
port of destination. If the ship is lost on the way or the cargo is
damaged or stolen, the shipping company loses the freight. Freight
insurance is taken to guard against such risk.
4. Liability insurance: It is one in which the insurer undertakes to
indemnify against the loss which the insured may suffer on account of
liability to a third party caused by collision of the ship and other
similar hazards.
Under marine insurance, the following persons are deemed to have
insurable interest:--
 The owner of the ship,
 The owner of the cargo,
 A creditor who has advanced money on the security of the ship or
cargo to the extent of his loan,
 The master and crew members of the ship in respect of their wages,
 If the subject matter is mortgaged, the mortgager in respect of full
value of the ship, and also in respect of any sum due to him,
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 Any trustee holding any property in trust in respect of such property,

 In incase of advance freight the person advancing the freight in so far
as such freight is repayable in case of loss, and
 The insured in the charges of any insurance policy which he may take.
TYPES OF MARINE INSURANCE POLICIES
1. Voyage policy: The policy is issued to cover up a specific transit from a
particular point to another. The cover ceases upon the carrier reaching
the town of destination.
2. Annual Policy – if a business involues regular dispatch of goods
throughout the year and the quantity can be reasonably estimated in
advance an annual policy can be obtained on the basis of estimated
annual dispatches.
3. Declaration policy – this policy can be obtained for any specific
amount so that every dispatch to be insured for transit risks can be
declared as agreed to nad accounted until the sum insured is exhausted.
4. Special Declaration – if sum insured selected is more that Rs. 2 Crores,
a special declaration policy can be obtained for which volume discount
in premium is allowed. The annual dispatches should be reasonably
estimated and the policy taken.
5. Open Cover – it is a memorandom of agreement by which the insured
will set out the terms of cover and rates of premium for one year
transaction of Marine dispatches. The open cover is not a Policy and it is
not negotiable.
6. Duty policy – A deviation in Marine Insurance is to issue custom duty
payable for imports by the same Marine Policy through there may not
be any transit risks involved. In case of CIF contracts, the exporter to
the extent of CIF values would have arranged the Insurance only.
7. Increase value Policy – increased value if goods imported are
damaged in transit and such goods can be procured locally AT prices
higher than the CIF + custom duty, the increased value policy covers
such difference in value. This is purely an indemnity policy and for the
benefit of the insured only and cannot be assigned to others.
8. Marine delays policy – in case of new project where equipment has to
be produced indigenously or by imports any loss or damage to the
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equipment during transit may involve ordering of fresh equipment

which leads to delay in completion of the project commencement of
production and thereby loss of profits.
WARRANTIES
According to Section 35(1) of the marine insurance act, warranty is an
undertaking by the assured that some particular thing shall or shall not be
done, or that some condition shall be fulfilled, or whereby he affirms or
negatives the existence of a particular state of facts. A warranty may be
expressed or implied
1. Express warranties an express warranty is one which is expressly

stated in the policy of insurance. It must be included in, or written
upon, the policy, or must be contained in some document incorporated
by references into the policy. It may be in any form of words from
which the intention to warrant is to be inferred.
There is no limit to the number of express warranties but the following
express warranties are generally included in a marine policy:
1. The ship is seaworthy on a particular day.
2. The ship will sail on a specified day.
3. The ship will proceed to the destination without any deviation.
4. The ship is neutral and will remain so during the voyage.
2. Implied warranties are those warranties which are presumed to be

present in the contract of marine insurance unless excluded by express
words to the contrary these warranties are:
These warranties are:-
1. Seaworthiness: (section 41-42) - In a voyage policy there is an implied
warranty that at the commencement of the voyage the ship in seaworthy
for the purpose of the particulars adventure insured. It includes the
following :-
a) That the ship is properly constructed
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b) Its machine is in proper working condition

c) That it has sufficient and efficient crew
d) That it is sufficiently provided necessities of the voyage.
e) That it is not over loaded or badly loaded.
f) Warranty of seaworthiness attaches only up to the time of the
sailing of the ship. Once the ship sails, the warranty does not
operate.
g) In a voyage policy, where the voyage is to be performed in stages,
the ship must be seaworthy at the beginning of each stage.
h) It should be at the commencement of risk be reasonable fit to
encounter the ordinary perils of the port.
i) It is also considered that the ship is reasonable fit to carry goods.
j) That the adventure insured is a lawful one (Sec. 43)
2. Legality of voyage – 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.
3. Non-deviation – there is an implied warranty that the ship shall not
deviate from its prescribed or the usual customary route. If it does the
insurer shall not be liable unless the deviation is lawfully excused.
Policy Conditions/clauses of Marine Insurance Policy

1. Name of the Insurance – The opening words of a marine insurance
policy are : “Be it knows that …….” Or “Whereas it has been proposed to
his company by ………”. The above opening words are followed by a
blank space, which is intended for the insertion of the name of insured
or his agent.
2. Assignment Clause – This clause makes provision for the assignment
of the policy so that a person who later acquires insurable interest in
the subject-matter of insurance may avail of the protection given by the
policy.
3. Lost or Not Lost – Lost or not lost clause is a portion of ocean marine
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insurance policy providing for coverage even if loss has occurred before
the insurance was placed. The necessity of inserting “Lost or not lost”
clause was that sometimes the merchants received information of the
shipment of their cargoes very later, particularly after the sailing of the
steamer. In such cases, therefore both the assured and the underwriter
were ignorant about the safety or otherwise of the goods. In order to
provide protection to merchants for such shipments, the “lost or not
lost” clause has been included in the policy.
Marine Losses
A Marine policy does not cover all the risks an insurer is liable to indemnify
an assured in respect of the losses which resulted from perils insured
against. Where the loss is happened as a result of any other peril, the
insurer shall not be bound by it.
Types of Marine losses –
1. Total loss (Actual /Constructive)
2. Partial loss (particular/general average loss)
The loss may be either total or partial. It may be divided into two types
Actual/Constructive total losses. An actual loss occurs when the subject
matter is destroyed or so damaged as to cease to be the thing of the kind
insured. The insured irretrievable deprived of the subject matter of
insurance.
Constructive total loss cannot be preserved from actual loss without an
expenditure which would exceed its value, when the expenditure had been
incurred. In case of constructive total loss, the assured may either treat the
loss as partial loss or abandon the subject matter to the insurer and treat
the loss as if it were an actual total loss. Losses other than total losses are
partial losses; it is of two types- particular average loss, and General
average loss. A particular average loss is a partial of the subject matter
insured caused by a peril insured againsed, in which is not a general loss.
Examples of particular average losses:- A ship meets with foul weather, as
a result of which she sustains serious damages causing a wreckage of her
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propeller.
If during violence of the weather, sea water get into the ship through a hole
and damages the cargo, the damage so caused is particular average on
cargo, and if the cargo is sugar, the damage is a particular average on
freight.
General average loss—General average loss is a loss caused by directly or
consequential on a general average act. It includes general average
expenditure as well as general average sacrifice. It is being done voluntarily
in time of peril for the purpose of securing the property on the board.
Essentials:- It must be in peril, The sacrifice must be voluntary, It should be
made reasonably, The object of the sacrifice must be to preserve the
property on the board. Usually the general average losses are of two types-
General average Sacrifice and General Average Expenses.
SOCIAL INSURANCE IN INDIA
Social Insurance has been developed to provide economic security to
weaker sections of the society who are unable to pay the premium for
adequate insurance. The following type of insurance can be included in
social Insurance:
1. Sickness Insurance: In this type of insurance medical benefits,
medicines and reimbursement of pay during the sickness period, etc.
are given to the insured person who fell sick. The subsidiary
companies of General Insurance Corporation issue “Mediclaim”
policies for this purpose.
2. Death Insurance: Economic assistance is provided to dependents of
the assured in case of death during employment. The employer can
transfer his liability by getting insurance policy againsed employees.
3. Disability Insurance: There is a provision for compensation in case of
total or partial disability suffered by factory employees due to accident
while working in factories. According to Employees compensation act,
the responsibility to pay compensation is vest with the employer. But
the employer transfers his liability on the insurer by taking Group
Insurance policy.
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4. Unemployment insurance: Insured in case of unemployment due to

certain reason, given economic support till he gets employment.
5. Old age Insurance: Insured or his dependents are paid, after certain
age, economic assistance.
“Apart from these insurance social security legislations like ESIC,
Workmen compensation Act, provident fund Act etc. are also enacted
to provide social security in case of old age pension, sickness,
disablement, maternity etc”.
Under the concept of social justice, The Indian Government has
extended the scope of social insurance. This scheme is now extended
to Daily- wagers, Rikshaw pullers, craftsmen etc. through different
Insurance plans.
The process of fast development in the society gave rise to a number
of risks or hazards. To provide security againsed such hazards, many
other type of Insurance also have been developed. Such as, crops,
cattle, legal liability insurance etc.
Unemployment insurance
Under unemployment insurance, the insured receives benefits in case they
have lost their job for no apparent fault of theirs. This insurance is mainly
provided by the government and not by insurance companies, and the
benefits can be accessed for a limited time period. There are other criteria of
eligibility that can help them get the insurance claim for unemployment. In
situations like self-employment or voluntary unemployment, the individual
is not entitled to any claims.
Unemployment Claim Across the World
A lot of countries around the world provide unemployment benefits to their
citizens. In Finland and Norway, the insurance claim for unemployment can
be somewhere between 80-90% of the last salary. In Germany, Israel, Japan
and Sweden these claims range between 66 and 90% of their previous pay.
In the USA, the maximum an unemployed citizen is entitled to is 27% of the
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income. Australia is also close to the USA in terms of unemployment claim. A

single, childless individual in Australia is entitled to 28.9% of the previous
income.
Unemployment Claims in India
A majority of the Indian population is unaware of this, but the Indian
government does provide unemployed people with benefits. The labour laws
of India are formulated to ensure the welfare of the working population of
the country. There are many benefits provided to the employees under the
acts of labour laws and the insurance benefits are provided under the
Employee State Insurance Act, 1948. The awareness of these benefits is very
low, and hence the majority of unemployed citizens in India are unable to
avail these benefits. The scheme that provides coverage to unemployed on
behalf of the government of India is Rajeev Gandhi Shramik Kalyan Yojana
(RGSKY).
Rajeev Gandhi Shramik Kalyan Yojana (RGSKY)

RGSKY was introduced on April 1, 2005, by the central government. All the
employees are entitled to these benefits under the Employee State
Insurance (ESI) Act. The employees are given the benefits if they get
unemployed involuntarily. The reasons can be disability rising from injury
at workplace and closure of the business. The benefits and other terms and
conditions of the policy are revised from time to time. This is the policy
made for the benefit of Indian youth keeping into mind the rising
unemployment in the country.
Motor vehicle Insurance
Under this insurance a personal or commercial vehicle is subjected to
combined insurance againsed the risk of-
1. Loss or damage to the motor vehicle and its accessories on account of
accident or theft,
2. Death of or injury to the owner or passenger of the vehicle due to accident,
3. Damages payable to third parties by the owner of the vehicle for accident.
A comprehensive insurance policy may be taken to cover all these risks.

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Insurance against the first two types of risks is optional. But every owner of
motor vehicle is required to take out an insurance policy to cover the third
party risks under the Motor Vehicle act, 1956. Such a policy is known as
‘Third party insurance or liability insurance’.
Under such a policy, the third party who has suffered any loss can sue the
insurer directly even though he was not a party to the contract of
insurance.
For Ex- motor insurance by united India insurance co. ltd. This policy
provides insurance cover to owners of the vehicle, financers or lessee, who
have insurable interest in a motor vehicle.
Examine the Major types of Motor Insurance Policies
The all Motor tarrif governs motor insurance business in India. According to
the Tariff a classes of vehicles use two types of Policy Forms. They are Form
A and Form B. We discuss these polices in detail below
(I) Form A Policy – As per the provisions of Motor Vehicles Act, all the
vehicles plying in the Territorial Limits of India must possess an ACT
POLICY at all times . The violation is punishable with fine etc., as per
Motor Vehicle act. This policy covers:
1. Third Party Property Damage/Bodily Injury (Fatal or Non-fatal) when
Insured vehicle is used in a public place.
2. Insured's legal liability, as per Motor vehicle Act, arising out of accident
caused by or arising out of the use of the vehicle anywhere in India, and
3. Such liability as above in respect of injury (fata or non-fatal) to any
third party and damage to any third parties' property.
The owners of the vehicle having insurable interest in it undertake this
policy. The period of the cover is generally a period of 12 months from the
date of inception. However, Short period covers are also available at higher
rates. Subject to limit of liability laid down in the Motor Vehicle Act, the
policy pays the insured's legal liability for death/disability for third party,
loss or damage to third party property. Also, the liability for claimant's cost is
also met (Maximum Rs. 6,000/- unless additional premium for opting
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unlimited cover is paid.
Third Party (A person other Ohm Insured and the Insurer) who is injure
dies due to an accident with the Insured Vehicle, the amount of
compensation adjudged by the Motor Accident Claims Tribunal is made
good by the insurers and is payable to the legal heir of the deceased the
injured. The amount of compensation is unlimited/has no preset limit.
(II) Form B Policy - Form B (comprehensive policy) cover differs for
various classes of vehicles. For private cars and motorcycles, there are
two Sections in the Comprehensive Policy. Additionally, Section III is
provided for commercial vehicles.
SECTION I: It concerns loss or damage to the vehicle and covers the risks
like:
1. Fire, Explosion, Self-ignition and Lightning
2. Burglary, Housebreaking and Theft
3. Riot, Strike, Malicious and Terrorism Damage
4. Earthquake
5. Flood, Typhoon, Hurricane, Storm, Tempest, Inundation Cyclone,
Hailstorm
6. Accidental External Means.
7. Transit by road, rail, inland waterway, lift, elevator or air.
For motorcycles and commercial vehicles, the risk of frost damage is also
covered.
SECTION II : It covers the liabilities towards third parties, i.e. liabilities of
bodily injuries and property damage.
SECTION III : It is applicable to commercial vehicles. It covers the vehicle
while it is being used for the purpose of “Towing Disabled Vehicles”. This
section covers Third Party Liabilities that the insured vehicle or the one
being towed for reward/remuneration. Further, the insurance company is
also not liable for damages to the towed vehicle or any property being
conveyed thereby.
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Mediclaim and health Insurance

With medical costs sky rocketing daily there is a growing need of having a
Mediclaim policy in your name. It will help you cover the medical expenses
in case you have to undergo certain medical treatment or are
hospitalization for some reason. It basically provides a health cover of a
certain amount of money and hence in the case of incurring any medical
expenses, the expenses to a certain limit are borne by the particular
insurance / Mediclaim Company under whom you might have taken the
Mediclaim policy.
It can be taken on an individual basis or for the entire family if the need be.
The insurance premium will defer from company to company and will
depend upon whether the policy has been taken for an individual or for a
group or the policy is cashless or not.
Principles of Health Insurance
 INDEMNITY; A contract of insurance is a type of contract of indemnity
in which an insurer contract with the insured to mitigate any monitory
loss held to the insured on happening of some event as mentioned in
the contract.
It is necessary that some monitory or pecuniary loss happen to the
insured due to happening of some event.
The insured is not permitted to make profit from the insurance.
 GOOD FAITH; The contract of insurance must be on good faith. The
insured is of the obligation to declare full and true disclosure of facts
to the insurer. The insurance company on the facts declared by the
insured will decide the type of insurance and the liability and as well
as the premium. So the true disclosure of all facts is necessary. The
insurance company may declare any contract as void, if later found
that the facts declared by the insured are not true.
a new material fact , which is not material at the time of entering into
the contract but later it became material during the course of time on
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the basis of which the insurer may declare the contract void or not
ready to renew the contract , should be declare by the insured to the
insurer as soon as he came to know the fact.
Any material facts comes in the knowledge of the insured subsequently
need not to be disclosed.
 INSURABLE INTEREST; it is some monitory or pecuniary interest. A
person is said to have an insurable interest when he is so situated with
regard to thing insured that he would have benefit from its existence
and loss from its destruction.
The insured must has insurable interest in every contract of insurance
with respect of any object or life.
The insurable interest of a husband will be in the life of his own and his
wife or wife has insurable interest in the life of her own or his husband
in case of life insurance policies.
The insurable interest must be pecuniary interest.
 CAUSA PROXIMA; i.e. the “proximate cause” this is applicable in case of
fire insurance. In these cases when damage has resulted due to two or
more causes, we have to look to the proximate or the nearest cause of
damage, although the damage might have not been taken without
remote cause. In the case of loss the proximate cause should be
considered not the remote cause. If the cause of the loss is the peril as
mentioned in the contract then the insured will get the claim otherwise
not.
 MITIGATION OF LOSS; it is an important principal of insurance, that in
case of peril or accident the insured must try his best to save insured
interest in the property or life. That he must take all measures to
minimise the loss that he would have taken if the property were
uninsured.
 RISK MUST ATTACH; the risk must attached i.e. the insurer receives
the premium in a contract of insurance for running a certain risk. If the
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risk is not run or not continuous on the business or the property of the
insured then the premium received by the insurer should be returned.
 SUBROGATION: it applies in case of fire policies. Subrogation is a right
of the insurers to enforce for their own benefit all the rights and
remedies which the insured posses against third parties in respect of
subject matter. Subrogation is thus the substitution of one person in
place of another in relation to the claim, its rights, remedies or
securities.
 CONTRIBUTION: Where a particular property is insured with two or
more insurers against the same risk, it is called “double insurance”. In
the event of loss, the insured will get compensation only for the amount
of actual loss. He will compensated by the concerned companies on the
basis of “principal of contribution”. The insurers must share the claim
to the extent sum insured with them. If in this case whole loss is paid by
one insurer then it is entitled to demand contribution from other
insurers.
Group Insurance
Group insurance is a type of insurance plan that covers a group of people
under one single policy. It provides the same level of insurance coverage to
all the members of the group eliminating the need for buying individual
policies for each member. All the members of the group are covered against
the same risk under a group insurance scheme. This type of group insurance
policy is provided by the organization as part of the benefit program to its
group members.
Types of Groups
1. Formal Groups – Formal groups refer to the groups where all the
members of the group work for the same employer or group owner. It
is also known as the employee-employer group and covers groups such
as companies, business organizations, professional organizations, etc.
Under this type of group, the policy is purchased by the employer.
2. Informal Groups – Informal groups refer to the groups where all
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members of the group do not work for the same employer. Also
considered as non-employee -employer group, the insurance policy in
such groups is purchased by the group administrator on behalf of all
the members. This type of group includes members of the same
societies, cultural associations as well as same holders of same credit
cards.
Characteristics of Group Insurance:
(1)All group members covered – a group insurance policy covers all the
members of a group under one policy, no matter the size of the group.
(2)Standardized coverage – the coverage provided under the group
insurance scheme remains the same for all members of the group,
irrespective of their age, position or economic status.
(3)Groups of all sizes covered – most group insurance plans provided
coverage to all groups irrespective of how big the group may be in size.
Whether the group comprises of seven or 300 members, there will be a
group insurance policy to cover them.
(4)Coverage ends upon leaving group – the insured group member is
covered under a group insurance scheme as long as he is part of the group.
His coverage will end as soon as he leaves the group.
Benefits of Group Insurance
1. Improve Employee Retention – With a group insurance policy offers,
companies can attract and retain their employees. This also improves
the business' brand image.
2. Enable Ease of Operation – A group insurance policy has a
straightforward and simple insurance renewal process. It is mainly
because all the different policies under a group insurance policy get
processed as a single policy, making the whole renewal process
seamless. You, as an employer, can get all the members of your
organization secured under one single group insurance policy. There is
no difficulty in maintaining multiple insurance plans for every
employee.
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3. Better Cost Savings – The group insurance policy covers a large

number of people, thereby reducing the risk factor. Hence you can avail
of cost effective group policy insurance premium rates.
4. Increase Employee Satisfaction – With a comprehensive group
insurance policy and services, organizations ensure that all its
employees are safeguarded against unfortunate events. Not only does a
group insurance policy protect your employees, but it also shows that
you, as an organization, care about their needs. This increases overall
employee satisfaction.
5. Serves as an add on benefit – To the individuals associated with the
organization, a group insurance policy serves as an add on benefit. You
can have various coverage slabs based on salary or contribution.
6. Meet Statutory Obligations – If you are an employer, a group
insurance policy helps you meet your statutory obligations.
7. Avail Tax-Saving Advantages – The premium paid for a group
insurance policy helps you avail tax benefits in the form of tax
exemption under [2] section 37 of the Income Tax Act . So you can save a
substantial amount.
8. Better Claim Settlement process – Dedicated claim settlement teams
handle the group insurance policy. Hence, claim settlements have lesser
restrictions and faster request processing.
Cattle insurance
Cattle insurance protects Indian rural people from financial loss incurred
due to the death of their cattle. The cost of cattle is high and their loss can
force farmers to get into a debt cycle. With cattle insurance, farmers will get
comprehensive protection against the cattle loss.
Types of Cattle Insurance
There are two types of risks which are insured under this policy:
1. Death of cattle: It covers loss of life due to accident or injury and

disease occurred due to surgical infection
2. Permanent Disability cover: It covers the risk of permanent and
complete disability
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What Cattle Insurance Covers?

Besides death or disability caused by fire, road accidents, drowning,
electrocution, snake bites or poisoning, cattle insurance offers coverage for
other issues as well. They include:
 Death due to natural calamities like storms and earthquakes
 Death due to disease, infection or calving during surgical operations
 Permanent disability, for milch cows this refers to incapacity to
conceive and yield milk. For bulls, this refers to incapacity to breed.
Exclusion : Death of the animal, arising out of the following are excluded-
1. War and allied risks, strikes, riot and civil commotion.
2. Slaughter of the animal without prior consent of the insures.
3. Fire, lighting, surgical operations, breeding and loss occasioned by the
animal becoming unfit.
How Cattle Insurance Functions?
 Cattle insurance is an important aspect for livestock management in
rural area. Let us understand how this insurance works.
 First step is to identify the cattle and determine the price of the cattle
before finalizing the sum assured. This assessment is jointly carried out
by the beneficiary and an authorised veterinary doctor
 Beneficiary needs to pay the premium amount on monthly or yearly
basis, according to the policy
 In case of death or disability of the cattle, the beneficiary immediately
informs the bank about the mishap
 All the required documents need to be submitted to the insurance
company
 Insurance company representative will validate all the documents and
settle the claim.
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Insurance Law

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KRISHNA INSTITUTE OF LAW

(Approved by BCI affiliated to CCSU, Meerut)

In a competitive economy, risk bearing is essential. Since every one of us is

 CAUSA PROXIMA; i.e. the “proximate cause” this is applicable in case of

This is not a contract of This is essentially an arrangement of

Features or Element of Insurance Contract

is subject to payment of premium.

 Consideration- consideration means “something in return”, in simple words

 Competency of the parties- competency should not be confused with

the Indian stamp Act.

Enforceability means, if one of the parties violates the terms and

 Death Insurance: Economic assistance is provided to dependents of the

interest in the subject matter of Insurance. In damage or loss to the subject

The presence of pecuniary interest is not applicable in the case of life

4. Life of children – it is presumed that parents have insurable interest in

shares, he is entitled to a contribution from other insurers.

Settlement of death claim

These risk factors include:

cause of death will also be asked.

Types of Life Insurance Policies

2. Endowment Policies: An endowment policy is designed primarily to

or goods, caused by fire, during a specified period.

3. Valued policy:- It is a departure from the contract of indemnity.

4. Floating policy:- It is a policy which covers loss by fire caused to

5. Replacement or Re-installment policy:- It is a policy in which the

the cost of replacement of the property damaged or destroyed by fire.

There are four types of marine insurance

 Any trustee holding any property in trust in respect of such property,

equipment during transit may involve ordering of fresh equipment

1. Express warranties an express warranty is one which is expressly

2. Implied warranties are those warranties which are presumed to be

b) Its machine is in proper working condition

Policy Conditions/clauses of Marine Insurance Policy

4. Unemployment insurance: Insured in case of unemployment due to

income. Australia is also close to the USA in terms of unemployment claim. A

Rajeev Gandhi Shramik Kalyan Yojana (RGSKY)

A comprehensive insurance policy may be taken to cover all these risks.

unlimited cover is paid.

Mediclaim and health Insurance

3. Better Cost Savings – The group insurance policy covers a large

1. Death of cattle: It covers loss of life due to accident or injury and

What Cattle Insurance Covers?

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