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Roles And Importance Of Organization

Organization is the means with which human association can be made through which common goals can be obtained. Therefore, organization is an important tool to achieve the firm's goals. Some of the important roles of organization are as follows:

1. Organization helps optimum utilization of human resources
A effective organization utilizes the human resources properly. It places the individuals- the right individuals in the right jobs in the right position and department. Such marching of individual and job helps better use of human talent and capability. A sound organization effectively performs the selection, training, remuneration and promotion functions, which helps to encourage the personnel to identify themselves with the enterprise.

2. Effective and efficient administration
Organization is needed for efficient and effective administration, because it defines very clearly, the various activities and authority relationship in the organization structure.

3. Organization facilitates growth and diversification
A sound and effective organization contributes to the growth and diversification of the enterprise through the effective management. It is always accepted that a sound organization helps the management to implement decentralization and divisionalization, through which management can enhance its strength and undertake more activities and thus become large in its shape and size.

4. Organization provides optimum use of new technology
A sound organization is always flexible. As it is so, it has capacity of absorbing changes in the environment. Hence, according to the situation and on the demand, it helps and allows the management for the proper and optimum use of technological improvement.

                              Also Read: Concept And Meaning Of Organization

5. Effective coordination and communication
It is only sound organization of an enterprise which creates coordination and establish communication among various departments and individuals along with different levels of the enterprises. It helps to establish structural relationship between different jobs and positions. It also fixes the channels of communication among different members of the business home.

6. Training and development
A sound and effective organizing function offers a good scope for the development of managerial ability and competency by providing training.

7. Productivity and job satisfaction
Productivity of human resources can be increased when personnel of any organization are made free to exercise their ideas. This is possible only in those organization where exists democratic and participative management. If there exists participative management, the members can use their talent freely and maximum, thus, their productivity will be increased and they will get maximum satisfaction in their jobs.

Concept And Meaning Of Organization

Meaning Of Organization

Organization refers to a mechanism which enables people to live together and perform the activities collectively. Organization is the foundation on which the whole structure of management is built. Organization is the backbone of management, without which managers cannot perform what they have to perform.

Organization or organizing is one of the important function of management. To achieve corporate goals, strong, reliable and effective organization is needed. Goals may net be achieved if all the sections, departments and divisions are not well organized, coordinated and integrated. Organizing involves those means, techniques, methods and procedures which help to integrate and coordinate different functions and units of the business.

                                    Also Read: Roles And Importance Of Organization

Concepts Of Organization
'Organization'' as a word is being used in two sense. These two concepts of organization are as follows:

1. Organization as a structure/Organization in static sense
Organization as a structure is a static concept. It is a framework of the business and a structure of relationship between various positions of the organization. It can be understood as a structural framework of duties and responsibilities through which an organization functions.

2. Organization as a process/Organization in dynamic sense
Organization as a process is a dynamic concept. It is most acceptable concept of organization. As a process, organization determines, arranges, groups and assigns the activities of the enterprise to achieve the common goals.

Steps Involved For Settlement Of Insurance Claims

The insured party has to make a claim against the insurance company for the loss according to the terms and conditions agreed upon in the insurance policy in case of loss occurs. The insured has to take a detailed procedure for the settlement of the claim, which consists of the following steps.

1. Giving notice
If a loss occurs, the insured must gather the detailed information about the loss and immediately serve a notice to the insurance company about the loss occurred. The insured must give a written notice giving details of damage of the subject-matters.

2. Making a claim
Within a stated period after the loss has occurred, the insured must submit the claim in writing to the insurance company. The claim must mention the details of damage, the value of the damaged subject-matters at the time when loss occurred, and the particular of other insurance, if there any. The value of damaged property or subject-matter mentioned in the claim must not include any profit.

                      Also Read: Steps Of Effecting Marine Insurance Policy

3. Providing evidence
The claim for the loss must be supported by adequate evidence of the loss and of the value of loss. Therefore, the insured must gather sufficient evidence and provide it to the insurance company. The insured must always be ready to produce such evidence as and when required.

4. Assessing claim
Upon the receipt of claim and supporting evidence from the insured, the insurance company attempts to assess the true nature of damage, volume and value of damage based on the supporting evidence. Such an assessment is done by the surveyor and the evaluator appointed by the insurance company.

                     Also Read: Process Of Effecting Fire Insurance Policy

5. Settling the claim
After the scrutiny of the claim, supporting evidence and assessment of report of the surveyor, the insurance company decides the amount of compensation for the actual loss. The amount of compensation may be the same as per the claim made or less than that depending on the true assessment of the value of loss. Then, the insurance company sends a letter to the insured for the settlement of claim. The claim is settled by giving payment to the insured.

                    Also Read: Steps For Effecting Life Insurance Policy


Steps Of Effecting Marine Insurance Policy

Taking marine insurance policy has to follow a detailed procedures which consists of the following steps:

1. Selecting an insurance company
The person who wishes to take marine insurance has to select and appropriate insurance company that carries out such insurance. The selection of appropriate insurance company depends on a number of factors like history of the company, financial soundness and credibility of the company.

2. Filling up a proposal form
The perspective person then should fill up a proposal form that is available from the insurance company or its agent. The proposal form is a printed sheet in a standard format that requires certain information filled regarding the name, address and occupation of the intended policyholder, nature and value of property or cargo, the type of policy sought and the sum of premium to be paid.

                   Also Read: Steps Involved For Settlement Of Insurance Claims


3. Gathering evidence
After receiving the proposal form, the insurance company gathers evidence of respectability of the prospective policyholder. The evidence of respectability includes the information about honesty, credibility and the financial position of the intended policyholder. The insurance company gathers such information from third parties such as banks.

4. Evaluating property
Once the insurance company gathers the evidence of respectability of the proposer, it starts surveying and evaluating the subject matters being insured. Based on the survey and evaluation, the level of risk involved in the subject matters is ascertained and the sum of premium to be paid by the proposer is determined.

5. Accepting the proposal
After the scrutiny of the proposal by collecting the evidence of respectability and surveyor and evaluators' report, the insurance company decides whether to accept the proposal. If everything is acceptable and the officials of the insurance company are satisfied with the details inquired, the insurance company accepts the proposal and requests the proposer for the payment of the premium.

6. Issuing a cover note
Upon receipt of the premium from the proposer, the insurance company issues a receipt of payment which is called cover note and this is like a temporary policy as it covers and protects the subject matters from any loss occurred before the issue of the final marine insurance policy.

                              Also Read: Steps For Effecting Life Insurance Policy

7. Issuing marine insurance policy
Finally marine insurance policy is prepared and issued to the policyholder after it is duly stamped and signed by the official of the insurance company and policyholder. This policy contains personal information of the policyholder, details of the subject-matters and terms and conditions which are agreed upon by the insurer and insured. Upon the issue of marine insurance policy, it is fully operational and covers the loss that may occur in sea voyage.

                  Also Read: Process Of Effecting Fire Insurance Policy


Types Of Risks Covered By Modern Marine Insurance

The marine insurance covers many risks. The types of risks covered by modern marine insurance are as follows:

1. Perils of the sea
Perils of sea means any type of incident of contingent accidents or casualties at the sea. In course of the voyage, the ship may be damaged due to sea storm, sea pirates, tsunami and accidents of any kind. These all risks are covered by marine insurance.

2. Fire
It is likely that fire may occur in the ship, when it is voyage.Inflammable items such as coal, oil, electricity and others are required in larger quantity for the operation of ship. Thus, fire may be included as risk in marine insurance.

3. Theft
The goods may be stolen during a sea voyage. Therefore, theft is one of the risks associated with the sea transportation. For the purpose of marine insurance, the thieves must not be the captain and his crew themselves or the people traveling by the ship. They must be outsiders, who use force for stealing goods.

4. War risks
The shipping companies may have to face many risks during the war period. There may exist a risk of loss of ship, cargo and freight due to attacks and counter defensive operations. War risks are insurable in marine insurance.

5. Land risk
Marine insurance indemnifies the subject-matter (cargo) of the parties right from the godown of the exporting country to the godown of the importing country against any risk of loss. The risks of loss associated with other means of transportation such as railways, roadways and others, warehouses, ports of both the countries and others are included and covered under marine insurance.

6. Jettison
Jettison means throwing overboard a part of cargo or any other goods in order to reduce the weight in the ship. Some of the cargo is deliberately thrown away with the object of preventing the ship from further damage. Loss caused by this method is one kind of marine risk and it can be covered under the marine insurance policy.

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Concept And Types Of Marine Insurance Policy

Concept Of Marine Insurance Policy

Marine insurance policy is a contract whereby the insurer indemnifies the loss caused by perils of the sea. The duration of its effectiveness, insurable interest of the insured and the principle of utmost good faith are, among others, necessary elements in a marine insurance policy. Besides, the value of the object must be clearly described for the sake of indemnity. It is also necessary that obligations and liabilities to be taken by the insurer must be declared in the policy.

The subject matter of marine insurance policy generally include ship, cargo, and freight. However, two additional elements i.e. terms of time factor and valuation of object are also considered as legal requirements for the insurance policy.

                            Also Read: Types Of Risks Covered By Marine Insurance

Types Of Marine Insurance Policy
Marine insurance policy can be classified into five types as follows:

1. Types of marine insurance policy on the basis of hull
Loss may occur in or to the ship if any event happens in sea routes. The ship may totally or partially damaged. In any case, the loss is very big one. Since the ship is very valuable, it becomes necessary to insure it. The insurance of ship is called hull insurance policy. Generally, hull insurance is entered for a specified period; and if any loss incurs within the period, the insurer indemnifies the loss. The following are the types of marine insurance policy on the basis of hull:

i. Single vessel policy
Single vessel policy covers only one ship. Thus the shipping company possessing many ships may enter into contract with the insurance company for each ship separately.

ii. Fleet policy
A shipping company may own a number of ships. The insurance company may insure all the hips under a single policy, which is known as fleet policy. Fleet policy allows the shipping company to include several ships of a particular route under a single policy.

iii. Construction policy
The ships under construction are insured under construction policy. This policy covers the ship that is under construction in the yard, and is not allowed for normal sailing in the ship, except for trail sailing.

                             Also Read: Significance Of Marine Insurance

2. Types of marine insurance policy on the basis of cargo
In marine insurance, not only ships but also cargo are insured against the loss caused by sea perils. When the owner, consignor or sender insures the cargo against the marine loss, it is called cargo policy. The cargo insurance policy is of three types:

i. Named policy
As its name suggests, the name and registration number of a particular ship, and the quantity of each type of goods on board are written clearly in such a policy. If any loss occurs to the goods on board as specified in the policy, the insurance company is liable for the loss.

ii. Floating policy
Floating policy is also known as running cargo policy. It describes the general terms and leaves the amount of each shipment and particulars to be declared later on. This policy is taken out for a round large sum, which is specified at each declaration and is attached to each shipment.It protection for the risk of loss of cargo, the value of which may change from one shipment to another.

iii. All risk policy
All risk policy covers all risks associated with the cargo from godown to godown. Besides, the risks of sea perils, other risks of loss caused by out-break of war, strikes, negligence ans so on are also covered under this policy.
                      
3. Types of marine insurance policy on the basis of freight
The freight is carriage payable to the shipping company by the owners of the goods upon the arrival of ship at the port of destination. A shipping company can purchase the freight policy in order to have protection against the loss of freight and other contingent liabilities. Generally, freight insurance policy are of two types:

i. With cargo freight policy
It is a contract between the shipping company and the insurance company for the protection of cargo as well as freight from any unseen risks. Under this policy, the insurance company indemnifies the loss of cargo as well as the loss of freight of the cargo to the shipping company.

ii. Without cargo freight policy
If the contract between the shipping company and the insurance company takes place only for the protection of freight of cargo from any contingent loss, such a contract is called without cargo freight policy.

                             Also Read: Steps Of Effecting Marine Insurance Policy

4. Types of marine insurance policy on the basis of term
The marine insurance policy can be classified on the basis of term of period for the voyage:

i. Time policy
Time policy provides the insured to cover all marine risks for a specified period of time not exceeding 12 months.

ii. Voyage policy
A voyage policy covers all marine risks involved in a particular sea voyage, irrespective of the time taken to accomplish the voyage. Therefore, the policy is issued to cover the voyage from the port of origin to the port of destination.

iii. Mixed policy
Mixed policy is a combination of both time and voyage policy. This policy, therefore, combines the elements of both time and voyage policy. This policy is taken by the insured for specified time and voyage.

                         Also Read: Concept And Meaning Of Marine Insurance

5. Types of marine insurance policy on the basis of valuation
On basis of valuation of objects being shipped, there are two types of marine insurance policy:

i. Valued policy
In this policy, the value of objects insured is fixed in advance at a time when the contract is consented. If any loss occurs, the same will be indemnified on the same basis.

ii. Unvalued policy
Under this policy, the value of the object is not specified. The value of the object to be calculated after considering many expenses during the period. Thus, the value for indemnity is ascertained if and when the loss actually occurs.

Significance Of Marine Insurance

The importance of marine insurance has increased more than ever before in this age of globalization. The following points highlight the importance or significance of marine insurance.

1. Marine insurance facilitates global trade
The volume of trade through the sea have tremendously increased, and so has the risk of loss at the sea. Therefore, marine insurance plays significant role in facilitating the global trade by minimizing the risk thereof.

2. Marine insurance ensures economic property
The volume of marine insurance business is an indicator of the economic prosperity of a country. There is a close link between a sound marine insurance market and industrial development.

                     Also Read: Types Of Risks Covered By Marine Insurance

3. Marine insurance provides peace of mind
Marine insurance provides peace of mind to the businessmen by meeting their financial losses from marine risks. It helps to reduce tension and fear, and takes away anxiety from the businessmen and managers who are in the international business. As a result, they are able to operate their business without any tension, fear, anxiety.

                     
4. Marine insurance improves quality of life
Marine insurance helps control losses that may arise from the marine risks. As a consequence, people are encouraged to engage more in international business. This means more investments, more jobs, more production, more income and more consumption of goods and services which help to improve the people's quality of life.

                     Also Read: Concept And Types Of Marine Insurance Policy

5. Marine insurance provides social benefits
Marine insurance helps businessmen to recover funds from a loss. This keeps the business going, jobs are not lost, and goods and services continue to be sold. The social benefit of this are that people do not loose their jobs and their sources of income are intact. This contributes to the unhindered growth of the national economy.

                    Also Read: Steps Of Effecting Marine Insurance Policy

Concept And Meaning Of Marine Insurance

Human beings have always been fascinated by sea travel and therefore, exposed to dangers of storms, pirates and accidents at the sea. The origin of modern marine insurance is, however, associated with the evolution of trade through the sea. Originally, marine insurance was designed to protect the shipping companies and owners of cargo against perils of the sea. In modern times, it covers the risks of loss caused by perils on the land also.
Marine insurance is a legal contract between the insurer and the insured that provides protection against marine losses. The insurer also called the underwriter, is an insurance company which indemnifies the insured against loss caused by perils of the sea.

The insured is generally a shipping company and merchants who hire ships for carrying their goods from one port to another. Marine insurance is a contract that covers the ship, the cargo, the freight and other liabilities, and protects them against the risk of loss caused by perils of sea. The marine insurance contract is valid for a specified voyage or for a specified time, or for a specified voyage and time.

The subject matter of marine insurance may be either cargo, hull or freight. The insurance taken on goods is called cargo insurance. When the ship is insured, the insurance becomes hull insurance. The shipping company lose the freight if the goods are not delivered at the destination port. To protect such risk, the shipping company can take an insurance policy on its freight. Such an insurance is called freight insurance.

Therefore, marine insurance is branch of insurance and is basically a contract of indemnity. It provides protection against the risk of loss that may be caused by perils of sea. Generally, it covers the ship, the cargo or, the freight money and protects them against the marine loss for a certain period of time, voyage or route.

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Steps Or Process Of Effecting Fire Insurance Policy

A number of steps must be taken to enter into a contract between the insurance company and the insured to indemnify the property of latter from the risk of fire. These are called procedures of effecting the fire insurance policy. The following are the important steps that must be taken to buy a fire insurance policy.

1. Submission of proposal
An intending person must fill up the printed proposal form which is distributed by the insurance company free of cost. The proposal form solicits, in addition to the name and address of the proposer, other particulars concerning the object to be insured and the physical and moral hazards involved in it.

2. Evidence of moral character or responsibility
Since a fire insurance contract involves moral hazards, the insurance companies may ask for documentary evidence of moral character and responsibility of the proposer issued in his favor by respected persons or agencies. Many insurance companies do not ask for it these days, however. But if required, it must be enclosed with the proposal form.

                    Also Read: Steps Involved For Settlement Of Insurance Claims

3. Survey and physical verification
After receiving the proposal, the insurance company sends the surveyors for physical verification of proposed insurable object. While verifying the object physically, the surveyors have to see the location and the arrangements made for the protection of the insurable object.

4. Acceptance of proposal
The insurance company accepts the proposal of the risks deem insurable after the assessment of the survey report and the evidence of respectability. Accordingly, a letter of acceptance is written to the proposer instructing him to pay the premium.

                   Also Read: Steps Of Effecting Marine Insurance Policy

5. Payment of premium
The proposer makes the payment of the specified premium at the specified time. Upon receiving premium, the insurance company issues the installment receipt together with the cover note which acknowledges the acceptance of the proposal by the insurance company. The cover note is also called interim protection note.

6. Commencement of risk
The liability on the part of insurance company begins right from the date of issue of interim protection note. It is usually written for a period of 30 days in lieu of the policy document according to which the fire risks of the insured are borne by the insurance company. It is automatically cancelled from the date of the issue of policy document.

                    Also Read: Steps For Effecting Life Insurance Policy

7. Issue of fire insurance policy
The insurance policy takes sometime to get it ready. After its preparation during the period covered by the cover note, it is sent to the policyholder. The fire insurance policy document includes everything concerning the terms and conditions of the contract and is useful in ascertaining the mutual rights and duties of the insurer and insured.

Concept And types Of Fire Insurance Policy

Concept of fire insurance policy

A fire insurance policy is a contract in which the element of indemnification is applied. The fire insurance policy is issued for one year and on the request of the policyholder it is renewed every year. If, within the insured period, the property is damaged or lost due to fire, only then it will indemnified up to the loss not exceeding the insured amount. further, the risk coverage is wider in fire insurance to cover any loss caused by fire which is accidental and unintentional. In order to receive indemnity in fire insurance two conditions must be fulfilled; first, there must be ignition of actual fire and secondly, the fire must be accidental, not intentional.

Types Of Fire Insurance Policy
On the basis of risks covered, values of properties and kinds of indemnity provided, the fire insurance policy can be classified into the following types:

                           Also Read: Process Of Effecting Fire Insurance Policy

1. Types of fire insurance policy on the basis of risk covered
On the basis of coverage of risk, the fire insurance policy can be divided into the following three types:

i. Comprehensive policy
A fire insurance policy is called comprehensive policy when it covers other risks of loss caused by burglary, riots, arson, civil commotion, explosions, civil war, accidents and others in addition to the risk of loss caused by fire in one single policy.

ii. Blanket policy
A fire insurance policy in which a single policy is used to insure properties located at one or different locations against the risk of fire is called blanket policy. The insured may have different properties at different locations. If one policy is take for all the properties located at different places, its is called blanket fire insurance policy.

iii. Consequential loss policy
A consequential loss fire insurance policy is meant for indemnifying the loss caused not directly by fire but incidental to the event of fire. Under this type of fire insurance policy, the insurance company not only compensate the loss caused by fire, but also other indirect losses such as loss of net profit due to expenses like salaries, interest, increased cost of advertising and hiring of temporary premises.

                          
2. Types of fire insurance policy on the basis of indemnity
On the basis of indemnity and coverage, fire insurance policy can be divided into following types:

i. Valued policy
A fire insurance policy is valued when the insured amount payable as indemnity to the policyholder is valued at the outset while issuing the policy.

ii. Valuable policy
Contrary to valued policy, valuable fire insurance policy is one in which the amount to be indemnified is valued after the event of fire. In this type of fire insurance policy, property is not valued at the time of taking policy. It is valued later when the incidence of fire occurs and damage is caused.

iii. Average policy
The fire insurance policy, which is termed with the average clause in its indemnification is called average policy. Under this policy, the insurer does not undertake to indemnify the actual loss if the insured property is under-insured. Rather, it is the average value of the actual loss relative to the actual value of the property insured, which is paid by the insurance company as compensation.

iv. Specific policy
Like the average policy, a specific fire insurance policy defines the risk coverage when under-insurance takes place. It is a policy in that it undertakes to indemnify the actual loss only within the extent of value insured.

v. Reinstatement policy
Under a reinstatement policy, the insurance company undertakes to replace the property damaged by fire. In this policy, the actual loss is not indemnified in monetary terms but insured goods or property is replaced.

                          Also Read: Concept And Meaning Of Fire Insurance

3. Types of fire insurance policy on the basis of value of stock
The fire insurance policy can be divided into the following types on the basis of value of stock:

i. Floating policy
A floating policy is one by which one or several kinds of goods lying at different locations are insured under one policy and fore one premium.

ii. Excess policy
An excess policy is supplementary fire insurance policy, which is purchased to cover additional risks beyond the coverage of original first loss policy. In such a case, a first loss policy is purchased for minimum stock value and additionally an excess policy is purchased for an anticipated increase in the total value of stock. This fire insurance policy is purchase by such merchants whose stocks fluctuate from time to time.

iii. Declaration policy
This fire insurance policy is issued for the maximum value of stock to be insured. At the beginning of contract, three-fourths of the premium payable is charged from the insured in advance. Every month, the policyholder is required to declare the value of present stock. In case of loss by fire, the compensation is made on the basis of the declared value. At the end of the insured period, based on the values of stock declared, the total of premium payable is worked out as average.

                    Also Read: Features Of Fire Insurance Contract

Features Of Fire Insurance Contract

The following are the main features of fire insurance:

1. Insurable Interest
The insured party should contain insurable interest in the property which he/she wants to insure. It should exist both at the time of taking the policy and also at the time of claiming loss. The insurable interest means the insured is benefited by the survival of the things insured and suffers a loss by their destruction.

2. Utmost Good Faith
A contract of insurance is understood as a contract of utmost good faith. The insured should make clear all the important points with regards to the subject-matter of the insurance so that the insurer may correctly estimate the risks involved. The insured should provide information regarding construction of the house, environment, possibility of catching fire and possible measures that can be taken in the case of any events. The insurance company may terminate the contract when it comes to know that the facts are not disclosed.

3. Personal Contact
A fire insurance contract is a personal contract. The insured is involved in this contract with his property. Therefore, the insurance company should have detailed and full knowledge about the behavior and character of the insured. As it is a personal contract, the insurance policy cannot be transferred without the permission of the insurance company. If the possession of the insured goods or property is transferred to the third person, the company has a right to terminate the contract of insurance.

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Concept And Meaning Of Fire Insurance

Concept And Meaning Of Fire Insurance

Fire is one of the most important and valuable gifts of nature to us. It has important place in human life, because fire plays a vital role. However, it has also been the risk of human life and property. Therefore, fire insurance has evolved for protecting human lives and properties from the risks of fire.

Fire insurance is a contract of indemnity against loss or damage of the properties arising from fire during an agreed period of time and up to the specified amount. Fire insurance is such an agreement whereby one party, the insurer, in return for a consideration called premium, undertakes to indemnify another party, the insured, against financial loss caused by an event of fire to the extent of actual loss or insured amount whichever is lower. The insured party has to pay the premium and the insurance company agrees to indemnify the insured. The rate of premium depends on the level of estimated risk. Premium will be high if the risk is higher and will be low if the risk is low.

Fire insurance covers losses only incurred due to fire. It cannot be for profit making.Therefore, the principles if investment and protection are not applied to fire insurance. In the fire insurance contract, only such loss is covered which directly arises through fire.

Therefore, fire insurance is a contract between an insurance company called insurer and a person called insured for compensation of loss of properties caused by fire, in which the former pays the amount of loss to the latter as agreed upon by the two.

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Features Of Life Insurance Contract

Since the life insurance is not an indemnity contract, the insurer, in his part, is required to pay a definite sum of money agreed on maturity of policy at the death or an amount in installment for a fixed period or during life. As such, contrary to other insurance policies, it has some distinct features. The essential features of life insurance are as follows:

1. Insurable interest
The insured or policyholder must have an insurable interest for a valid life insurance contract. Insurable interest arises out of pecuniary relationship which exists between the insurer and policy holder, the former or insurer stands to loose by the death of the policy holder or latter and or continuous to gain by his survival.
In life insurance contract, a person may have insurable interest for his own life as well as lives of his relatives such as wife, son, daughter etc. No person can purchase life insurance policy for a third person unless he has financial interest in his life.

                        Also Read: Steps For Effecting Life Insurance Policy

2. Utmost good faith
The life insurance requires that the principle of utmost good faith should be preserved by both the parties; insurer and insured. Utmost good faith between the parties is necessary in all kinds of contracts. The insured in particular, must disclose all facts accurately and completely with respect to the object of life policy.

3. Warranties
Warranties are the representations in life insurance which are embodied in the policy and expressly or impliedly forming part of the basis of the contract. Warranties are the integral part of the contract. These are the bases of the contract between insured and insurer and if any statement or information or presentation, whether material or non-material, is untrue the contract may be void and the premium paid by insured may be forfeited by the insurance company or insurer.

                  Also Read: Types Of Life Insurance Policy

4. Assignment and nomination
The life insurance policy can be assigned free for a legal consideration or love and affection. The insured may assigned to anybody on any ground. As such, the assignment shall be complete and effectual only on the execution of such endorsement either on the policy itself or by a separate deed.

5. Return of premium
Generally, the amount of premium paid cannot be refunded. however, for the reason of equity, the premium may be refunded. If it is the case of misrepresentation or breach of warranty, the insured, in the absence of any express condition to the contrary, can claim for return of premium paid. But, in case of guilty of fraud in obtaining policy, the insured cannot claim the amount of premium to be returned.

                      Also Read: Concept And Meaning Of Life Insurance Contract



Steps Or Procedures For Effecting Life Insurance Policy

A life insurance is a legal contract between two parties. Therefore, the parties who wishes to successfully enter into the contract has to take a number of steps. These steps comprise the procedures for effecting life insurance policy. The following are the important steps that are taken to effect the life insurance policy.

1. Proposal
A life insurance policy has to be proposed by ab intending policyholder. Therefore, he has to acquire printed proposal forms, which are available free of cost either with the insurance company or its agents. The proposer is required to dully fill up the form and submit it to the insurer with required enclosures. While filing up the form, he must give accurate information on all the material references.

2. Personal health statement and medical examination report
One of the sections of the proposal form is designated as personal health statement and medical examination of the prospective policy holder. Under this section, the proposer has to record his personal medical history inclusive of bio-data. Usually, this section covers the following aspects:
* Bio-data
* Physical measurement and identification marks such as height, weight and special identification marks.
* Smoking, drinking and drug habits, if any
* The disease that the proposer had in past, the treatments undergone and the profile of the doctor attended.

                         Also Read: Steps Involved For Settlement Of Insurance Claims

3. Agent's confidential report
Since the insurer is not in direct touch with the proposer, the agent's report is very important to it to decide whether or not to accept the proposed policy. The agents are usually required by the insurer to supply information about socio-economic status of the proposers together with their perception of the risk involved in the life of the assured.

4. Proof of age
The age certificate is an important document in life insurance contract, because it is on basis that the insurance company estimates probable risk and ascertains the amount of premium to be charged to the proposer.

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5. Acceptance of proposal
The proposal form and the accompanying reports are thoroughly scrutinized by the insurance company to take the decision on the proposal. If the proposal is good and the medical report and agent's confidential report are favorable, then only the insurance company accepts the proposal.

6. Payment of premium
The payment of the first installment of premium is very important in the life insurance, because it is from this date that the risk of loss of life is insured. Upon the receipt of the first installment of premium, a receipt is sent to the policyholder which serves as the acknowledgement of contract between him and the insurance company.

                       Also Read: Process Of Effecting Fire Insurance Policy

7. Issue of insurance policy
In due time, a formal document called 'life insurance policy' is prepared and sent to the policyholder properly sealed, signed and stamped. This contract of life insurance describes all the particulars of life insurance and the terms and conditions of life insurance contract.

Concept And Types Of Life Insurance Policy

Concept Of Life Insurance Policy
Life insurance policy is also known as life assurance, because the event insured against is definite to take place though the time of occurrence is uncertain. The life insurance policy combines the elements of protection and investment. It provides financial protection to the insured and his family members. Besides, it also provides investment benefits to the insured when he survives through the insured period.
Thus, life insurance policy is a contract between the insurer and the insured in which the former receives the premium from the insured either in lump-sum or in periodical installments, and the later receives certain sum of money either upon his death or upon the maturity of the policy.

Types Of Life Insurance Policy
There are several types of life insurance policies. These can be classified on several bases as follows:

1. Types of life insurance policy on the basis of duration
On the basis of duration of policy , life insurance policy can be of following types:

i. Whole life policy
Under whole life policy, the assured sum becomes due for payment to the successor or the nominee only after his death. The rate of premium is usually lower, because the assured is required to pay the amount of premium throughout the life.

ii. Term insurance policy
The term life insurance policy is offered to cover the risk of loss of life for a short period of time usually from 3 months to 7 years. Under this policy, the assured sum is payable to the nominee of the assured, if he dies during the term assured. The assurance comes to an end, if the assured survives through the term insured. This policy has the cheapest rate of premium and is usually paid throughout the insured term.

iii. Endowment policy
A life insurance policy is an endowment policy when a fixed sum of money becomes payable to the assured himself when he reaches the particular age, i.e, as agreed or on the death of assured party, if it takes place earlier before maturity. This policy is the most popular type of life insurance policy. In this policy, only a limited number of premiums are payable. However, it has higher rates of premium payable in fixed installments, but offers both investment and protection advantages.

iv. Survivor-ship policy
Two persons are involved in this type of life insurance policy. One is the person assured and another is a named or counter-life. The sum assured is payable to the counter-life, if the life assured dies before him. But if the counter-life dies before the life assured, nothing is payable to the life insured. For example, as a counter-life, a creditor may insure the life of debtor(the life assured).

2. Types of life insurance policy on the basis of premium paid
On the basis of premium payment, life insurance policies can be classified into the following types:

i. Single premium policy
In this policy, the whole amount of premium is paid in a single installment. Under this scheme, the total premium is paid in lump-sum in the beginning. As such, the policy holder is entitled to receive certain rebates on the payment of premium.

ii. Regular premium policy
Under this policy, premiums of equal amount are payable at regular intervals (monthly, quarterly, half-yearly or annually) as agreed upon by the insurer and insured.

iii. Limited premium policy
In limited premium policy, the obligation of paying premium is limited to a certain period of time only (5,7,10 or 12 years). However, the assured amount is payable upon the death of the policyholder. In case when the assured dies during the premium term, the premium payment obligation does not exist, yet the assured amount is payable to the nominee.

3. Types of life insurance policies on the basis of participation in profit

In this category, there are two types of life insurance policies as follows:

i. With profit or participative policy
A life insurance policy with profit is also called participative life insurance policy. As per the contract, if the policyholder has the right to participate in the profit earned by the insurance company, the policy is called with profit policy or participative policy.

ii. Without profit or non-participative policy
If the policyholder does not have the right to share the profit earned by the insurance company according to the agreement, this type of policy is called non-participative policy in which only the assured sum is payable to the policyholder at the time of maturity.

4. Types of life insurance policies on the basis of persons covered
The life insurance policy can be classified into the following two types based on the insured persons covered by the policy.

i. Single life policy
A single life policy covers the risk of life of only one person.If someone is taking it for himself, the insurance contract will be directly between insured and insurer with the nominee as the beneficiary.

ii. Joint life policy
In this policy, two or more lives are assured under one policy and hence, is called a joint life policy. Under this policy, the sum assured is payable to the survivor when one of the assured persons dies. Therefore, it is also called survivor-ship policy.

5. Types of life insurance policies on the basis of method of payment of assured amount
On this basis, a life insurance policy can be divided into the following two types:

i. Lump-sum policy
A limp-sum life insurance policy is one in which the amount assured is payable in lump-sum in one installment either to the policyholder or his nominee upon his death depending on the type of policy.

ii. Annuity plan
An annuity plan is one in which the sum assured is paid to the policyholder himself in the form of annuties (fixed periodical installments) for a fixed numbers of years or till his death whatever agreed upon

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