Types of Insurance

Insurance as a Social Security Tool
Insurance is not only a device of individual and business security but also a
device of social security. Social insurance is useful for solving various social
problems like unemployment, old age, crimes, disability and health care of the aged.
Burden of the state to provide relief to unemployment, destitute and aged citizens
may be reduced through the insurance arrangement. The large fund of insurance
companies can be utilized for society desirable investments, thus, ensuring the
utilization of society's fund for social welfare, and wellbeing.
The United Nations Organization’s declaration of Human Rights 1948 provides that,
“Everyone has a right to a standard of living adequate for the health and wellbeing of
himself and his family”. According to this right everyone has entitled to get food, cloth,
shelter, medical care and essential social services. They have also right to security in
case of unemployment, illness, disability, widowhood and any other causes beyond his
control.
The Government of India has also provided article 41 in Indian Constitution
regarding social security. Thus, insurance is not only a device of individual and
business security but also a device of social security. It works as a social security tool
as following.
1. Social Insurance :
The LIC of India has set up Social Security Fund and provided special insurance
plans for the benefit of poor and the people having below poverty line. It is also
helpful to agriculturist and the persons engaged in unorganized sector. Some of the
insurance plans are as,
i. Rural Self Employment Scheme
ii. Rural Group Insurance Scheme
iii. ShikshaSahyogYojana
iv. SarvatrikAarogyaBimaYojana
v. Crop Insurance
vi. Solatium Scheme etc.
2. Protection to wealth :
General Insurance Corporation of India and other private insurance companies
provides protection to properties of the society. Insurance is a mechanism of
indemnifying the loss occurs due to fire, flood, earthquake, theft and so many other
perils. Due to security provided by insurance against such perils peoples are free
from worries and they are getting satisfaction and comfort in life. Life insurance
provides protection against loss of human wealth. If human material is strong, well-
educated and care free, will generate maximum income. Society will have financial
security against old age, death, damage and disappearance of his physical wealth and
life wealth. The society protects against degradation through prevention of economic
losses with the help of insurance.
3. Economic growth of the nation:
Insurance plays important role in development of nation through development of
economy by mobilizing domestic savings. Insurance turns accumulated funds into
productive investment which is generated through small amount of premium.
Sufficient capital available from insurance companies accelerates the production
cycle. Insurance enables financial stability and encourages trade and commerce
activity. Thus, by providing strong hand and mind, protection against loss of property
and adequate capital to produce more wealth insurance create economic growth of
the nation.
4. Reduction in Inflation :
Too much circulation of money can increase the inflation in the economy.
Insurance withdraw money from society as a domestic savings through premium
which reduces the circulation of money. On the other hand insurance provides funds
for production which narrow down the inflation gap. Thus, insurance helps to control
the inflation which in turn increases the satisfaction level of the society.
Types of Insurance in brief

The insurance contract is classified in to three main types i.e. Personal
Insurance, Property Insurance and Guarantee Insurance.
I) Personal Insurance:
When an individual person takes insurance policy of own life then it is called as
personal insurance. In broad sense personal insurance is also called as Life
Insurance. Under this policy insurer provides insurance cover against unexpected
happenings like death, illness and accident. We cannot measure the loss of insured
when he dies; hence the principle of indemnity is applicable to this insurance.
The personal insurance classified in-to three types such as Life Insurance,
Personal Accident Insurance and Health Insurance.
Life Insurance :In life insurance individual can take the insurance of own life.
Any person are having unlimited insurable interest in own life, hence principle of
indemnity is notapplicable to life insurance. Life insurance again classified in to two
types i.e. whole life policy and endowment life policy.
Personal Accident Insurance :Under personal accident insurance insurer has to
pay compensation to insured if he disable to do work due to accident or his nominee
after death of insured. The compensation is depending upon percentage of
impairment.
Health Insurance: Under health insurance individual can make arrangement of
medical expenses, expenses of operation and other expenses of hospitalization.
Under this policy insurer undertake the responsibility of payment of the entire
amount directly to respective hospitals.
II) Property Insurance :
When individual or any organization can take insurance of his property for
compensation of future loss then it is called as Property Insurance. Property
insurance is a contract of indemnity. Therefore, principle of indemnity is applicable
to this insurance contract. The insured must have insurable interest in such property.
The insurer promise to pay loss occurs by insured due to damage of property within
the limit of policy amount. However, insurance does not protect the property from
any peril nor avoid the peril. Insurance only indemnifies the financial loss occur due
to uncertain risks. It is the main objective of the insurance to provide protection
against the financial loss due to the perils.
A person can take insurance of office building, house, furniture, domestic
products, raw material, plant and machinery, motor vehicle, jewelry, precious goods
etc.
III) Guarantee Insurance:
It is new type of insurance. Guarantee insurance is evolved early in the 20th
century. After industrial revolution the scope and volume of business transaction are
tremendously increased. Most of the businessmen are rely upon employees of the
organization. The two classes such as owner and employees are generated in the
society. At the same time risk of fraud and dishonesty is increased. Guarantee
insurance is an arrangement whereby the insurer agree to indemnify the insured for a
fixed amount against loss arising through dishonesty, fraud or a breach of contract.
e.g. If borrower not repaid the loan amount of bank, cashier of bank or any credit
society or business has misappropriate the cash in such case insurer agree to pay such
loss. The guarantee insurance is not against theft, but against the dishonesty of the
employee. Hence these two types are completely different from each other.
4. Liability Insurance :
Under liability insurance, a person is liable to a third person owing to provisions
of any law or to his employees under an act. The liability insurance covers the risks
of third party, compensation to employees under workmen’s compensation
insurance, liability of the automobile owners if damage to third party due to motor
accident. It also covers reinsurances.
Types of Insurance
Personal Insurance Property Insurance Guarantee Insurance Liability Insurance
Life Insurance Fiduciary Credit Privilege
Personal Accident Ins. Health Ins.

Third Party Employees Motor Reinsurance
Fire Marine Automobile Cattle Crop Theft Machinery

Types of Insurance

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Types of Insurance

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Insurance as a Social Security Tool

Types of Insurance in brief

Personal Insurance Property Insurance Guarantee Insurance Liability Insurance

Life Insurance Fiduciary Credit Privilege

Personal Accident Ins. Health Ins.

Fire Marine Automobile Cattle Crop Theft Machinery

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