Insurance is the protection against uncertain losses. An insurance policy is taken out by a person who wants to protect themselves against the occurrence of a particular event and the losses that may result from a regular payment to an insurance company called an insurance premium. In the event of the occurrence of the event, the insurance company will compensate the policyholder and restore his financial capacity in the situation in which he was before the occurrence of the damage. Therefore, taking out an insurance policy is essentially a transfer of risk from one party to another in exchange for a payment made. To define life insurance, it can be said that it is a contract between a policyholder and an insurance company in which the insurer pays the promised amount in exchange for a premium. It is received on the death of the insured or after a specified period. In addition to a claim for compensation, liability insurance also covers legal costs, costs and settlements. BCS provides a comprehensive insurance document verification service for your insurance policies and other contracts. With the BCS app, you can track an unlimited number of insurance certificates or opt for a comprehensive audit by our in-house experts to maximize your risk management efforts. Unlike other insurance tracking companies, BCS not only collects and tracks your insurance documents, but also verifies and corrects them. A person entitled to compensation is the party to a contract that is free from liability for damages related to losses. This is the status that most of us would aspire to in a negotiation. The life insurance policy offers protection against the loss of premature death and investments to meet the retirement requirement.
Other forms of insurance do not offer investment, as the premium paid is not refundable if unforeseen events (risks) do not occur in the period. Other insurances only offer protection against loss of property damage against insured risks. The sum insured that can be chosen under a life or accident insurance policy is usually up to 20 times the annual income of the policyholder, which is an indirect way to apply and comply with the principle of compensation. Life insurance works according to the concept of the value of human life, which corresponds to the present value of all future income that a person can earn in life for his family. In other words, it is the total value of income in modern times that the individual is expected to earn until retirement. The subject in life insurance is life. The likelihood of death would increase with age, regardless of the precautions that can be taken to improve health, while the property can be repaired and replaced in other insurance policies and can generally remain in good condition. As a rule, life insurance is taken out for a longer period. While other forms of insurance are not taken out for more than two years. A compensation contract prepared under section 124 of the Indian Contracts Act is a contract between 2 parties or persons in which one party promises to indemnify the other party in the event that the promised party suffers a loss or incurs costs or protects them from legal consequences caused by a third party or the promisor (first party) itself.
Most non-life insurance products, where insurance is taken out for a specific property whose value can be easily determined, are indemnity contracts. Therefore, all motor vehicle damage insurance, property insurance, engineering insurance, transportation insurance, liability insurance, etc. are all indemnification contracts. Here`s a simple example of how life insurance works. Let`s say Mr. Brown buys $250,000 in life insurance and names his wife as the beneficiary. He pays monthly premiums for the policy to the insurance company. A decade later, Mr. Brown died in a car accident.
After processing the documents, the insurance company makes a payment to Mr. Brown`s wife for the policy amount – $250,000. She can also receive extra money when he died in an accident if the policy includes a clause with an accidental death benefit. In some cases, however, compensation describes the act of guaranteeing freedom from liability for loss or damage. So if a contract provides for compensation for the losses of another party, you have achieved it. (However, it would be just as correct to say that you have compensation.) Although there is repatriation coverage where the insured can claim the full value of the car, this coverage is available for the payment of an additional premium and is only available for newer vehicles. In property, engineering and transport insurance, the same concept of compensation applies and the insurance is only compensated to bring him back to his post shortly before the loss. In indemnity policies, no depreciation is deducted if there is a partial loss repaired by the insurer, but a deduction of appropriate depreciation and recovery costs will certainly be made if there is a total loss when the repair costs are so high that it is not possible for the insurer to do so.
Regular health insurance, which covers hospitalizations, are also compensation products, as they essentially operate on the concept of reimbursing the costs you spend on medical treatment. Regardless of the exact term used to describe the compensation/compensation process, the most important thing to understand from a risk management perspective is that the clause establishes specific financial responsibilities in the case of certain events. Fire insurance and transport insurance contracts are similar in most cases in that both contracts are indemnification contracts. However, the following differences can be observed in both treaties. Wondering why life insurance is not a compensation contract? You may want to learn the difference between them. With only 2.82% of India`s population having life insurance, it is important to ensure that people are fully informed about its characteristics and nature. Keep reading this article to understand the concepts of life insurance and clearing contract and how they differ. In transport insurance, the risks of moral hazard are not as great as in fire insurance. Like compensation policies, there are performance policies where a lump sum is paid when the covered incident occurs. Life insurance policies such as term life insurance, which provides death benefits, personal accident insurance policies, and health insurance policies that cover certain diseases such as cancer, are some of the insurance products that work on this concept. Human life is not a product of a certain value where damping plates can be introduced and calculations can be made to settle claims on a compensable basis. For this reason, life insurance contracts cannot be concluded on the basis of compensation.
Risk classification is generally easier in life insurance than in other types of insurance contracts. .