INTRODUCTION:

Insurance is a means of protection from financial loss in

which, in exchange for a fee, a party agrees to compensate
another party in the event of a certain loss, damage, or
injury. It is a form of risk management, primarily used to
hedge against the risk of a contingent or uncertain loss.

MEANING OF INSURANCE:

Insurance is a contract, represented by a policy, in which a

policyholder receives financial protection or reimbursement
against losses from an insurance company. The company
pools clients’ risks to make payments more affordable for the
insured. Most people have some insurance: for their car, their
house, their healthcare, or their life.

Insurance policies hedge against financial losses resulting

from accidents, injury, or property damage. Insurance also
helps cover costs associated with liability (legal responsibility)
for damage or injury caused to a third party.

OBJECTIVES OF INSURANCE:
Granting Security To People:

Insurance primarily serves the purpose of granting security

against losses and damages to people.

It is an agreement enters into by two parties in which one

promises to protect other from losses in

return for premium paid by other party.

Minimisation Of Losses

Insurance aims at minimisation of losses arising from future

risks and uncertainties. It adds

certainty of payments to people for happening of uncertain

events. Insurance assures the

individuals for compensation of losses.

Diversifying The Risk

Insurance works towards diversifying the risk among large

number of people. It aims at reducing

the adverse effects of any future contingency by spreading

the overall risk associated with it.

Reduces The Anxiety And Fear

Insurance policies relieves the individuals of any tension and

fear regarding the future risks and
uncertainties. It guarantees them of compensation in
occurrence of any unfavourable

contingencies.

Mobilises The Saving

Mobilisation of savings is another important objective of

insurance. It attracts people for

investments by presenting them with numerous insurance

policies guarantying of compensation

for losses.

Generation Of Capital

Insurance companies leads to capital generation by collecting

large amount of funds from public.

They regularly charges premium from their large customers

for providing them protection

against losses.

Why is Insurance Needed

Here are some of the reasons why insurance could prove to

be essential:
1. Insurance plans will help you pay for medical
emergencies, hospitalization, contraction of any illnesses
and treatment, and medical care required in the future.

2. The financial loss to the family due to the unfortunate

death of the sole earner can be covered by insurance
plans. The family can also repay any debts like home
loans or other debts which the person insured may have
incurred in his/her lifetime.

3. Insurance plans will help your family maintain their

standard of living in case you are not around in the
future. This will help them cover the costs of running
the household through the insurance lump sum payout.
The insurance money will give your family some much-
needed breathing space along with coverage for all
expenditure in case of death/accident/medical emergency
of the policyholder.

4. Insurance plans will help in protecting the future of your

child in terms of his/her education. They will make sure
that your children are financially secured while pursuing
their dreams and ambitions without any compromises,
even when you are not around.

5. Many insurance plans come with savings and investment

schemes along with regular coverage. These help in
building wealth/savings for the future through regular
investments. You pay premiums regularly and a portion
 of the same goes towards life coverage while the other
portion goes towards either a savings plan or investment
plan, whichever you choose based on your future goals
and needs.

PRINCIPLES OF INSURANCE:

 Utmost Good Faith

 Insurable Interest
 Proximate Cause
 Indemnity
 Subrogation
 Contribution
 Loss Minimization

The Principle of Utmost Good Faith

 Both parties involved in an insurance contract—the

insured (policy holder) and the insurer (the company)—
should act in good faith towards each other.

 The insurer and the insured must provide clear and

concise information regarding the terms and conditions of
the contract

The Principle of Insurable Interest

Insurable interest just means that the subject matter of the
contract must provide some financial gain by existing for the
insured (or policyholder) and would lead to a financial loss if
damaged, destroyed, stolen, or lost.

 The insured must have an insurable interest in the

subject matter of the insurance contract.

 The owner of the subject is said to have an insurable

interest until s/he is no longer the owner.

The Principle of Indemnity

 Indemnity is a guarantee to restore the insured to the

position he or she was in before the uncertain incident
that caused a loss for the insured. The insurer (provider)
compensates the insured (policyholder).

 The insurance company promises to compensate the

policyholder for the amount of the loss up to the amount
agreed upon in the contract.

The Principle of Contribution

 Contribution establishes a corollary among all the

insurance contracts involved in an incident or with the
same subject.
  Contribution allows for the insured to claim indemnity to
the extent of actual loss from all the insurance contracts
involved in his or her claim.

The Principle of Subrogation

This principle can be a little confusing, but the example

should help make it clear. Subrogation is substituting one
creditor (the insurance company) for another (another
insurance company representing the person responsible for
the loss).

 After the insured (policyholder) has been compensated

for the incurred loss on a piece of property that was
insured, the rights of ownership of this property go to
the insurer.

The Principle of Proximate Cause

 The loss of insured property can be caused by more

than one incident even in succession to each other.

 Property may be insured against some but not all

causes of loss.

 When a property is not insured against all causes, the

nearest cause is to be found out.
  If the proximate cause is one in which the property is
insured against, then the insurer must pay compensation.
If it is not a cause the property is insured against, then
the insurer doesn’t have to pay.

The Principle of Loss Minimization

This is the final principle that creates an insurance contract

and the most simple one probably.

 In an uncertain event, it is the insured’s responsibility to

take all precautions to minimize the loss on the insured
property.

RE-INSURANCE:

Reinsurance, often referred to as insurance for insurance

companies, is a contract between a reinsurer and an insurer.
In this contract, the insurance company—known as the ceding
party or cedent—transfers some of its insured risk to the
reinsurance company. The reinsurance company then assumes
all or part of one or more insurance policies issued by the
ceding party.

DOUBLE INSURANCE:
Double or multiple insurance occurs when you have taken out
two or more insurance plans that cover the same risk. This
may be the case with the same provider or with different
providers. Insureds often unknowingly take out multiple
insurance plans, as is sometimes the case with accident
insurance.

ADVANTAGES:

1. Financial Support

A family member may be eligible to receive financial support

from Insurance in the event of death. In the event of a loss
to a business, Insurance offers financial support to aid in the
company's recovery and reconstruction. If they have health
insurance, they can be qualified for financial support for
medical care.

There is no such thing as a guarantee in life. There can be

a fatality as well as some commercial mishaps. In both of
these circumstances, the loss is painful to accept. Therefore,
Insurance offers financial security against such an unforeseen
loss.

2. Insurance Decreases Risks

Individuals pay an insurance firm a predetermined sum up to

a predetermined time limit or lifetime and are reimbursed in
the event of a loss. There is no way to eliminate risk in life
or business, but it is possible to decrease, disperse, or share
it. In this instance, insurance companies take on risk to share
company and individual risk among insurance companies.

3. The Stability of the Living Standard

When there is a possibility of unanticipated losses, Insurance

offers financial help to ensure that people can maintain their
living standards.

4. Motivation for Savings

People pay a specific amount for Insurance based on an

agreement for a specific amount of time or for the rest of
their life, which motivates them to develop a saving habit.
After discovering how important saving is, people start doing
it in several ways.

5. Jobs Opportunities

The business model for Insurance is successful, just like any

other firm. It is directed at numerous business owners and
entrepreneurs. The business has a lot of cash flow as a
result. As they need employees to manage and maintain cash
flow and run the business, they publish job openings based
on qualifications and provide employment opportunities. The
idea that "the harder you work, the more money you make"
may be used to determine how much an employee is paid.
Insurance firms and agencies make significant profits from
selling and providing insurance services.

6. International/foreign Trades

Because of the potential for mishaps when carrying

commodities by ships, roads, or other means of transportation
in the past, individuals were reluctant to engage in
international trade. However, insurance companies take on all
those risks and pay for losses in today's global market.
Additionally, they shield an exporter of products and services
from a foreign buyer who refuses to pay.

There are numerous business trade insurance options, such

as Export Credit.

7. Loan Facilities

Banks are more like to extend credit to an organization if it

has acquired Insurance. No, it's challenging for big
businesses to obtain a loan from a bank, but if you have a
small business or startup and have secured business
insurance, your chances of doing so increase.

For newly established firms that depend on them, banks

almost often require Insurance against the demise of one or
more of the principal founders to decrease risk. The fine print
also specifies that the bank must be paid first to repay the
debt when the payment on death is made.
The likelihood that you will be approved for a loan from a
financial institution is also increased by obtaining your own
life and health insurance.

8. Stability of Business

Insurance can aid in loss management even if your business

has unforeseen losses. Your employees will be more inclined
to come to work if you provide them with Insurance.
Insurance, therefore, helps the office run more efficiently.
Also, the economy will improve in stability.

9. Specialization

The use of Insurance is limited, just like that of other

financial instruments. Consequently, you can spend the money
towards your original goal.

10. Tax-Free Funds

The fact that insurance proceeds are frequently tax-delayed is

another benefit. The policy's benefits and any other income
you may receive are tax-free, except for employment
insurance plans, where the benefits are treated like other
forms of taxable income.

For instance, life insurance reduces the possibility that, even

if you have enough money saved to pay off your remaining
debt, your family won't be able to cover the normal
expenditures in the event of your sudden death. If you pass
away while covered by lifetime insurance, the payoff to your
beneficiary is tax-free.

Disadvantages:

1. Insurance Has Many Terms and Conditions

Insurance covers not all losses in a person's life or business

situation. Insurance plans' terms and conditions give
consumers financial assistance solely in accordance with
those conditions. Therefore, one must carefully study and
comprehend the terms and circumstances before purchasing
any insurance.

2. Long and Costly Legal Procedures

The legal process to receive a claim submitted by an

individual may be drawn out. As a result, it occasionally may
become problematic in an emergency. The cost of an
insurance plan can frequently fluctuate based on the type of
policy a person chooses as well as other considerations;
occasionally, this cost may be higher than the Insurance
guaranteed. Therefore, people need to be conscious of the
price.

3. Fraud Agency

The market is filled with a variety of fraud agencies. People

who choose to purchase Insurance before purchasing it must
be capable of handling themselves and the issue or seek
professional assistance when choosing insurance firms.

4. Not for all People

It might be an issue for certain people that some insurance,

such as life and health insurance, typically does not provide
coverage for sick and elderly folks.

5. Potential Criminal Activity

Policyholders may be persuaded to engage in fraud or other

criminal activity to receive the promised insurance money,
which may result in civil offenses.

6. Increases Cost

Business owners are continuously looking for methods to cut

costs and reviewing budgets. Insurance can be pricey,
particularly in sectors workers' compensation injuries are
frequent. Insurance for the construction industry is more
expensive than Insurance for accountancy firms. A company
should examine its rules as it expands to ensure they
continue meeting market demands. Otherwise, the policy might
only partially insure a loss, leaving the company inadequately
covered.

7. Additional Fees

One could have to pay additional fees in addition to the

premium. This additional cost covers the broker fee.
8. Professionalism Gap

Insurance brokers occasionally display a professionalism gap.

They can think they're pretending to be experts while looking
to defraud people and gain financial gain. They might even
carry out their duties while utilizing a phony insurance broker
license or without a current license. As a result, one should
request proof of an insurance broker license before employing
an intermediate service.

9. Insurance Broker Focusing to Close the Sale

It may not be easy to believe whether the insurance broker

is good since they concentrate on closing the sale. It is
because some insurance agents could be more concerned
with sealing the deal than comprehending what you want.

10. Limited Offers

It's important to remember that not all insurance brokers

interact with all insurance companies. Therefore there can be
certain offers that are restricted.

11. Lack of Experience

A rookie broker just getting started in this industry might

need to be more familiar with all the discounts. It can make
the buyer confused and bewildered.
12. Premiums Differs Based on Age

Low premiums are regarded as a perk of term insurance, but

since they change with age, your current rates would be
considerably lower than those you would pay later in life.

After assessing the advantages and downsides and learning

how and when to acquire Insurance, you can make a wise
decision now that you have all the facts.

13. It's Easy to Be Misled If You're Not Well-Informed

A few aspects of life insurance need to be clearer cut, and a

shady life insurance agent could easily mislead you into
purchasing a policy with more coverage than you require.
Before you put your name on the dotted line, do some
preliminary research and consult with an insurance broker like
Policygenius. To guarantee you receive the necessary
coverage from an insurer that will charge you the least,
Policygenius agents don't receive a commission on the
products they sell.

14. Life Insurance Can Be Confusing

The last point is that life insurance might need help

understanding. The jargon used to describe the many types of
policies, riders, and perks can be challenging to comprehend.
To make an informed conclusion, you must inquire about any
issues you have.
Causes of Business Risk

Natural Causes

Nature is an independent phenomenon and human beings

have no control over it. Natural calamities like earthquake,
flood, drought, famine etc. Affect a business a lot and can
result in heavy losses. The natural causes are such type of
uncertain factors that human beings cannot make any
preparation against.

Human Causes

Human causes are related to a chance of loss due to human

being or employees of the organization. The dishonesty of
employees can bring heavy losses for business e.g., the
employees may leak a business secret to a competitor and
may commit fraud also bring heavy losses by wastage of
resources.

The employees may hamper the production by going on

strikes, riots etc. This can also lead to heavy loss of
business condition. There can be price fluctuations in the
market, there can be a change in fashion, taste, preferences,
and demands of customers

Economic Causes

Economic causes are related to a chance of loss due to

change in the market. There can be a change in the degree
of competition. All these have a direct impact on the earnings
of the business.

Even change in Government policy affects the business a lot.

For example, in 1971 when Janata government came to power
the Coca-Cola Company and many other foreign companies
were sent back to India

Physical Causes

All the causes which result in damage of assets are

considered as a physical cause, for example, change in
technology may result in machinery being outdated, use of old
technology, mechanical defects may also result in damage of
assets such as the bursting of a boiler, accident to employee
etc.

Types of Business Risk

The business risk can be classified into two major categories:

Insurable Risk

The risks which can be recovered are called insurable risks.

The losses which can be made good or losses for which
company can get compensation from the insurance company
are called Insurable Risks. Generally, the natural and physical
risks are insurable risks, e.g., businessmen can take a fire
insurance policy to get protection from flood, earthquake or
from the damage of assets such as the bursting of boiler etc.

Non-insurable Risks
The risks for which no protection is available are called Non-
insurable risks. The businessmen cannot get compensation for
a change in demand or loss due to negligence or
carelessness of employees. Whether the risk is insurable or
non-insurable, only the loss can be shared but the risk
remains.

Double bar graph

Multiple Bar Graph

Again, as the name suggests, in a multiple bar graph, you

can make a comparison among various observations on the
basis of multiple parameters. You can include as many
parameters as you wish, however, each parameter should
have the same unit of measurement.

In a multiple bar graph, there are as many bars for each

observation as there are parameters. For instance, if the
marks of six students are being compared in four subjects,
then for each student there will be four bars drawn.

Example- The following multiple bar graph shows the marks

in 4 subjects of six students.