Business Support Services: Importance and Types of Insurance

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The term ‘Insurance’ refers to a contract between two parties, one known as insured and the other insurer. Insurance provide a cover to all sorts of business risks.

  • Document containing the contract is known as ‘Insurance Policy’.

  • Person whose risk is insured is called ‘Insured’ or ‘Assured’.

  • Person or the company which insures is known as ‘Insurer’, or ‘Assurer’.

  • Consideration in return for which the insurer agrees to compensate the insured is known as ‘Premium’.

Importance of Insurance

Importance of Insurance

Importance of Insurance

Importance of Insurance

  • Protection against risk: Various risks involved in business in form of a provision to compensate for the loss suffered by the insured.

  • Pooling of risk: Effect of the loss is spread over a large number of people.

  • Helps in securing loans: Insurance makes their security convenient to secure loans and advances from the financial institutions.

  • Protection against liabilities under various labour laws: Accidents leading to fatal injury, partial injury, disablement, as well as sickness and maternity.

  • Contribute to economic development: Insurance companies contributed fund to economic development are invested in various types of securities and projects.

  • Generation of employment: Provide employment to a large number of people on regular basis and working as insurance agents.

  • Social security: Life insurance provides security against risks and social security is provided to workers through the employee’s state insurance scheme.

Types of Insurance

Types of Insurance

Types of Insurance

Types of Insurance

Life Insurance

  • Life insurance is a contract that protects you against such types of situation.

  • Two basic types of life insurance policies:

    • Whole-life policy

    • Endowment Policy

  • Some situation like:

    • Person may face an untimely death on account of an accident or some illness.

    • Family of the deceased faces financial hardship.

    • Attaining old age, one may not have enough money to manage a comfortable living.

    • Need a large sum of money such as marriage of a son or daughter, higher professional education, etc.

  • Protection against the uncertainty of life.

  • Its scope has been extended to other areas like health insurance, disability insurance, pension plan, etc.

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