The purpose of life insurance is to provide the relatives and beneficiaries of a deceased person with some financial aid and help. Life insurance is a contract between the policyholder and the insurance company. It can be said that the insurance company or the insurer are providing a service to the policy-holder.
Let us take a look at how the system of a life policy works.
The policyholder pays the insurer a premium, which is generally paid on an annual basis. The amount of this premium depends on a variety of factors such as the health of the policyholder, occupation, medical history, and many such factors.
The insurance company pays the “sum assured” to the beneficiaries of the policy at the death of the insured, or at the end of the term
The insured can also borrow money against his own life policy
There are broadly two types of life policies- Term Policy and Whole Life Policy. Whole life policy will pay out whenever the policyholder will die. Term Policy is set for a term i.e. a certain number of years. Here the insurance covers the term and if the insured dies during the term, the policy will pay out. If the insured survives the term then there is no payout.
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A fire insurance is a contract between the policyholder and the insurer. Here the insurance company will pay to the policyholder any loss caused to him or his particular property when destroyed by a fire accident. So the protection is against any damage that the fire causes.
Here the policyholder pays an annual premium. And if a fire breaks out and causes damage to the property the insurance company will pay to the extent of the damages up to the insured amount. If the damages exceed such amount the company will not be liable for the excess amount. And if during the term such an incident does not occur, the premium amount will obviously lapse.
Two important characteristics of fire insurance are:
Insurable Interest: The policyholder must have an insurable interest in the property being insured. The loss of such property must affect the policyholder and their survival will benefit him.
Good Faith: The policyholder must disclose all facts to the insurer in good faith. All details about the property, its construction, the environment etc must be provided to the insurance company. If the company finds out at a later date that the policyholder withheld information they can terminate the policy.
Marine insurance is generally meant for sea transport and shipping corporations. It provides insurance to ships and the cargo they carry. Marine insurance covers any damage a ship or the cargo of the ship may suffer during the voyage or at any point between the start and end of the journey.
According to the terms of the insurance many kinds of financial losses are covered. Losses that occur due to natural disasters, such as storms or hurricanes, or loss that might occur due to theft or piracy and even losses due to accidents on deck.
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