INSURANCE LAW

AN ASSIGNMENT SUBMITTED FOR EVALUATION OF INTERNAL ASSESSMENT

OF SEMESTER – V OF B.A.L.L.B (HONS.) 5 YEAR COURSE

UNDER SUPERVISION OF SUBMITTED TO

DR. KAVITA DHULL DR.PREETI SEHRAWAT

Head & Dean Assisstant Professor

Faculty of Law Faculty of Law

M.D.U. Rohtak M.D.U. Rohtak

SUBMITTED BY

Anjuman Jangra

B.A.L.L.B (Sem. V)

Section – B

Roll No. 406

FACULTY OF LAW

MAHARISHI DAYANAND UNIVERSITY

ROHTAK – 124001

DECLARATION
 This Assignment on the topic “Classification and Principles of
Insurance” is being submitted to the Faculty of Law (M.D.U. Rohtak) for Internal
Assessment of Semester–V of B.A.L.L.B (Hons.) 5 Year Course. The matter
embodied in this assignment is original and has not been copied by any other
student of this University.

Dated : 13February 2022 ANJUMAN JANGRA

Place : Rohtak B.A.L.L.B. (III Year)

 MAHARISHI DAYANAND UNIVERSITY, ROHTAK

DR. KAVITA DHULL M.D.U. Campus, Rohtak

Head & Dean Phone No. 01262-266755 ®

Faculty of Law

M.D.U. Rohtak

CERTIFICATE OF APPRECIATION

This is to certify that Anjuman Jangra, a bonafide student of Faculty of

Law (M.D.U. Rohtak) has worked on the topic “Classification and Principles of
Insurance” under my guidance and supervision. His work is original and meets
the requirements laid down by M.D.U. Rohtak for Internal Assessment of
Semester-V of B.A.L.L.B (Hons.) 5 Year Course.

Supervised By Countersigned By

Dr. (Mrs.) Kavita Dhull Dr. Preeti Sehrawat

Head & Dean Assistant Professor

Faculty of Law Faculty of Law

M.D.U Rohtak M.D.U Rohtak

 ACKNOWLEDGEMENT

It gives me immense pleasure and a sense of gratitude to

acknowledge my indebtness to my teacher and research supervisor Dr.Kavita
Dhull (Head & Dean, Faculty of Law, M.D.U. Rohtak). Valuable guidance and
Sparing of time by Dr.Preeti Sehrawat (Assistant Professor of Insurance Law)
has considerably helped me a lot to complete this research work. His keen
interest and scholarly guidance in research work has inspired me at every stage
of my efforts in the completion of this study.

I am highly thankful to my learned and respected teacher Dr. Preeti

Sehrawat who afforded me every help to conduct this assignment on the topic of
great significance. His continuous encouragement besides the valuable advice he
rendered during discussion relating to complete issues concerning topic of
assignment has also enabled me to complete this study.

I wish to put on record my sense of gratitude to staff of Law Library

(M.D.U Rohtak) for providing me standard books, articles, periodicals, journals
and other materials needed to complete this study.

I am very thankful to my parents who contributed their day and

night for completion of this assignment. I am also thankful to my wife Smt. Renu
Jangra who helped me in this work.

Above all, I am thankful to God for blessing me strength to complete

this work.

Date : 31 January 2022 Anjuman Jangra

Place : Rohtak B.A.L.L.B (III Year)

 TABLE OF CONTENTS

MEANING OF INSURANCE
Insurance is a social device for spreading the chance of financial loss among a
large number of people. By purchasing insurance, a “person” shares risk with a
group of others, thereby reducing the individual potential for disastrous financial
consequences. Transacting insurance includes soliciting insurance, collecting
premiums and handling claims.

By insurance a person can protect himself and his dependents from loss arising
from future uncertain events like fire, accidents, early death and so on. Thus the
risk is not averted but the loss on the occurrence is shared by the members. The
function of insurance is to spread this loss over a large number of person
through the mechanism of co-operation.

DEFINITION OF INSURANCE
 Insurance is a co-operative device to spread the loss caused by a
particular risk over number of persons who are exposed to it who agree
to insure themselves against that risk.
 Insurance is a Co-operative form of distributing a certain risk over a
group of persons who are exposed to it.

 Insurance is an instrument of distributing the loss of few among many.

 In insurance one party (the insurance company) agree to pay to the other
party (the insured or his beneficiary) a certain sum upon a given
contingency (the risk) against which insurance is sought in return of a sum
of money as a premium paid by insured to the insurance company.

CLASSIFICATION OF INSURANCE

Following are the types of Insurance in India are as follows :-

(1) Life Insurance

(2) General Insurance
(a) Marine Insurance
(b) Fire Insurance
(c) Motor Vehicle Insurance
(d) Miscellaneous Insurance
 (i) Health Insurance
(ii) Disability Insurance
(iii) Home Owner’s Insurance
(iv) Automobile Insurance
(v) Property Insurance
(vi) Malpractice Insurance
(vii) Business Interruption Insurance
(viii) Liability Insurance
(3) Re-Insurance

The detailed description of all the kinds are as follows :

(1) Life Insurance

Life insurance provides for your family or some other named
beneficiaries on your death. Two general types are available: term
insurance provides coverage only during the term of the policy and pays
off only on the insured’s death; whole-life insurance provides savings as
well as insurance and can let the insured collect before death.
(2) General Insurance
(a) Marine Insurance
Marine Insurance  covers the loss or damage of ships, cargo,
terminals, and any transport by which the property is transferred,
acquired, or held between the points of origin and the final
destination. Cargo insurance is the sub-branch of marine
insurance, though Marine insurance also includes Onshore and
Offshore exposed property, (container terminals, ports, oil
platforms, pipelines), Hull, Marine Casualty, and Marine Liability.
When goods are transported by mail or courier, shipping
insurance is used instead. This kind of insurance has its origin in
 England. The Britishers opened seven marine insurance
companies in Kolkata between 1797 and 1810.
(b) Fire Insurance
The term fire insurance refers to a form of property
insurance that covers damage and losses caused by fire. Most
policies come with some form of fire protection, but homeowners
may be able to purchase additional coverage in case their
property is lost or damaged because of fire. Purchasing additional
fire coverage helps to cover the cost of replacement, repair, or
reconstruction of property above the limit set by the property
insurance policy. Fire insurance policies typically contain general
exclusions such as war, nuclear risks, and similar perils.

(c) Motor Vehicle Insurance

Motor vehicle insurance, also called automotive insurance, a
contract by which the insurer assumes the risk of any loss the
owner or operator of a car may incur through damage to property
or persons as the result of an accident. There are many specific
forms of motor vehicle insurance, varying not only in the kinds of
risk that they cover but also in the legal principles underlying
them.
(d) Miscellaneous Insurance
(i) Health Insurance

Health insurance covers the cost of hospitalization, visits

to the doctor’s office, and prescription medicines. The
most useful policies, provided by many employers, are
those that cover 100 percent of the costs of being
hospitalized and 80 percent of the charges for medicine
and a doctor’s services. Usually, the policy will contain a
 deductible amount; the insurer will not make payments
until after the deductible amount has been reached.
Twenty years ago, the deductible might have been the
first $100 or $250 of charges; today, it is often much
higher.

(ii) Disability Insurance

A disability policy pays a certain percentage of an

employee’s wages (or a fixed sum) weekly or monthly if
the employee becomes unable to work through illness or
an accident. Premiums are lower for policies with longer
waiting periods before payments must be made: a policy
that begins to pay a disabled worker within thirty days
might cost twice as much as one that defers payment for
six months.

(iii) Home Owner’s Insurance

A homeowner’s policy provides insurance for damages

or losses due to fire, theft, and other named perils. No
policy routinely covers all perils. The homeowner must
assess his needs by looking to the likely risks in his area
—earthquake, hailstorm, flooding, and so on.
Homeowner’s policies provide for reduced coverage if
the property is not insured for at least 80 percent of its
replacement costs. In inflationary times, this
requirement means that the owner must adjust the
policy limits upward each year or purchase a rider that
automatically adjusts for inflation. Where property
values have dropped substantially, the owner of a home
(or a commercial building) might find savings in
lowering the policy’s insured amount.
(iv) Automobile Insurance

Automobile insurance is perhaps the most commonly

held type of insurance. Automobile policies are required
in at least minimum amounts in all states. The typical
automobile policy covers liability for bodily injury and
property damage, medical payments, damage to or loss
of the car itself, and attorneys’ fees in case of a lawsuit.
(v) Property Insurance

No business should take a chance of leaving unprotected

its buildings, permanent fixtures, machinery, inventory,
and the like. Various property policies cover damage or
loss to a company’s own property or to property of
others stored on the premises.

(vi) Malpractice Insurance

Professionals such as doctors, lawyers, and accountants

will often purchase malpractice insurance to protect
against claims made by disgruntled patients or clients.
For doctors, the cost of such insurance has been rising
over the past thirty years, largely because of larger jury
awards against physicians who are negligent in the
practice of their profession.

(vii) Business Interruption Insurance

Depending on the size of the business and its

vulnerability to losses resulting from damage to
essential operating equipment or other property, a
company may wish to purchase insurance that will cover
loss of earnings if the business operations are
 interrupted in some way—by a strike, loss of power, loss
of raw material supply, and so on.

(viii) Liability Insurance

Businesses face a host of risks that could result in

substantial liabilities. Many types of policies are
available, including policies for owners, landlords, and
tenants (covering liability incurred on the premises); for
manufacturers and contractors (for liability incurred on
all premises); for a company’s products and completed
operations (for liability that results from warranties on
products or injuries caused by products); for owners and
contractors (protective liability for damages caused by
independent contractors engaged by the insured); and
for contractual liability (for failure to abide by
performances required by specific contracts).

(3) Re-Insurance

Reinsurance is insurance of insured risk where the insurer retains a part

and cedes the balance of a risk to the reinsurer. This is done to facilitate
the greater spread and reduce liability on the part of the insurer. Re-
Insurance, in simpler terms, is the insurance that is taken out by an
insurance company. Since insurance companies provide protection against
the risk of loss, insurance is a very risky business, and it is important that
an insurance company has its own protection in place to avoid bankruptcy.
Through a reinsurance scheme, an insurance company is able to bring
together or ‘pool’ its insurance policies and then divide up the risk among a
number of insurance providers so that in the event that a large loss occurs
 this will be divided up throughout a number of firms, thereby saving the
one insurance company from large losses.

INSURANCE v/s RE-INSURANCE

Insurance and reinsurance are similar in concept in that they are both tools that
guard against large losses. Insurance, on the one hand, is a protection for the
individual, whereas reinsurance is the protection taken out by a large insurance
firm to ensure that they survive large losses. The premium that is paid by an
individual will be received by the company that provides the insurance whereas
the insurance premium paid for reinsurance will be divided among all the
insurance companies in the pool that bear the risk of loss.

GENERAL INSURANCE v/s LIFE INSURANCE

Following are the points of distinction between General Insurance and Life
Insurance. They are :-

(1) Nature of Contract

General Insurance is a contingent contract whereas Life Insurance is
not a contingent Contract.
(2) Objective
The objective of General Insurance policy is to provide security against
the risk whereas The objective ofLife Insurance Policy is to provide
protection and encourage the investment of savings.
(3) Period and Premium
General Insurance is a short term contract and its premium varies with
the renewal of the contract whereas Life Insurance is a long term
contract and its premium remains fixed throughout the contract.
(4) Indemnity
 Under General Insurance policy, actual loss can be measured. Therefore,
insured is paid with the amount equal to the extent of loss occurred
whereas Under Life Insurance policy, actual loss occurred on the death
of a person is not possible to measure. Because of this, an insured
amount of policy is payable.
(5) Risk
In General Insurance policy, risk of loss increases with the passage of
time whereas In Life Insurance Policy, risk associated with the life of
the individual increases with the growing age of the person.
(6) Amount of Claim
In General Insurance policy, amount of policy is paid either to the extent
of loss suffered by an individual or the sum assured by the party
(whichever is low) whereas In Life Insurance policy, full amount of
policy is paid either at the event of maturity or death (whichever is
earlier)
(7) Surrender Value
In General Insurance, no such specification is made regarding surrender
value or paid up value whereas In Life Insurance, a specified amount of
surrender value or paid up value is contained.
(8) Reserve for Unexpired Risk
General Insurance maintains reserve for unexpired risk whereas Life
Insurance does not maintain any reserve for unexpired risk.

Advantages of insurance or Importance of insurance

In the word of George Pancham, Insurance is a great and progressing industry.
Importance of insurance is much more in our under developed country because
following are the advantages of insurance to the different groups.
 (1) Advantages of Insurance to Business
 Means of Economic Security
 Insurance increase business efficiency
 It enhance credit
 Business Continuation
 Welfare of Employee
 Helps in establishing International Trade
(2) Advantages of Insurance to Individual
 Insurance provide Security and safety
 Insurance eliminate dependency
 Insurance protects mortgaged property
 Life Insurance promote saving
 Exemption from Tax.
 Insurance provide profitable investments
(3) Advantages of Insurance to the society
 Source of Employment
 Wealth of the society is protected
 Reduction in inflation
 Economic growth of the country
 Capital Formation

FUNCTIONS OF INSURANCE
The functions of insurance can be studied into two parts (i) Primary
Functions, and (ii) Secondary Functions.

(1) Primary Functions:

 Insurance provides certainty

 Insurance provides protection

  Risk-Sharing
(2) Secondary Functions
Prevention of Loss:
.
It Provides Capital:
It Improves Efficiency:
It helps Economic Progress: