CA Rajkumar S. Adukia
Insurance may be described as a social device to reduce or eliminate risk of life and property. Under the plan of insurance, a large number of people associate themselves by sharing risk, attached to individual. The risk, which can be insured against include fire, the peril of sea, death, incident, & burglary. Any risk contingent upon these may be insured against at a premium commensurate with the risk involved.
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 ON happening of a certain event.
Insurance is a contract whereby, in return for the payment of premium by the insured, the insurers pay the financial losses suffered by the insured as a result of the occurrence of unforeseen events. With the help of Insurance, large number of people exposed to similar risks makes contributions to a common fund out of which the losses suffered by the unfortunate few, due to accidental events, are made good.
An insurer is a company selling the insurance; an insured or policyholder is the person or entity buying the insurance. The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, called the premium.
According to J.B. Maclean, ―Insurance is a method of spreading over a large number of persons a possible financial loss too serious to be conveniently borne by an individual.‖
What is insurance law?
Insurance law is the name given to practices of law surrounding insurance, including insurance policies and claims. Insurance regulation that governs the business of insurance is typically aimed at assuring the solvency of insurance companies. Thus,
this type of regulation governs capitalization, reserve policies, rates and various other “back office” processes.
Need for insurance
All assets have some economic value attached to them. There is also a possibility that these assets may get damaged/destroyed or become non-operational due to risks like breakdowns, fire, floods, earthquake etc. Different assets are exposed to different types of risks like a car has a risk of theft or meeting an accident, a house is exposed to risk of catching fire, a human is exposed to risk of death/accident. Hence insurance is required for the following reasons:
- Insurance acts as an important tool in providing a sense of security to the society on a whole. In case the bread earner of a family dies, the family suffers from direct financial loss as family’s income ceases. Life insurance is one alternate arrangement that offers some respite to the family from financial distress.
- The basic need of insurance arises as risks are uncertain and unpredictable in nature. Getting insurance for an asset does not mean that the asset is protected against risks or its exposure to risk is reduced, but it actually implies that in case the asset suffers any loss in value due to such risk, the insurance company bears the loss and compensates the insured by making payment to him.
- Insurance acts as a useful instrument in promoting savings and investments, particularly within the lower income and middle income families. These savings are used as investments to fuel economic growth.
To Read more Download Free E-Book Written by CA CA Rajkumar S. Adukia , Which Contains the following Topics
2. Historical background of Insurance
3. Insurance scenario in India
4. Evolution of Insurance law in India
5. Principles of Insurance law
6. List of legislations regulating the insurance sector in India
7. Life Insurance
8. General Insurance
9. Micro insurance
10. Overview of insurance laws in India
11. Concurrent Audit of Insurance companies
12. Corporate Governance Guidelines for insurance companies
13. Insurance intermediaries
15. Regulatory Authorities
16. Professional opportunities in insurance sector
17. Insurance Associations and Regulators across the world
18. Important websites