Professional Documents
Culture Documents
1. WHY INSURANCE?
Risk, which is uncertainty regarding loss, poses a problem to business and individuals in
nearly every walk of life. Risk is something that is now taken up front rather than be left to
circumstances or fate to decide. Executives, employees, investors, students, households,
travelers and farmers all confront risk and deal with it in various ways. And insurance is one
of the major risk-handling methods probably begun in Northern Italy some time during the
12th and 13th century and Marine Insurance came in the list first. Originally it was a voluntary
device. But in modern time insurance is treated as a contract between two parties.
Insurance plays a substantial role in the economic development and economic stability of a
country. Insurance constitutes an important service segment accentuating economic
development by resource mobilization, its utilization and by resource creation. It works on
the principle of pooling risks and charging each customer a premium based only on the
average risk of the pool. Insurance promises a compensation of monetary loss sustained by a
particular person due to the damage or destruction of a particular piece of property owned by
him, provided it happens due to certain causes. Thus, the primary purpose of insurance is to
cover the risk of uncertain losses by providing individuals and organizations with financial
protection through the collection of premiums. Insurance has peculiar advantages as a device
to handle risk and so ought to be used to bring about the greatest economic advantage to
society. Therefore, insurance has grown rapidly throughout the world.
2. DEFINITION OF INSURANCE
We can define insurance as a system of spreading the risk of one on the shoulders of many.
In other words, insurance may be defined as a contract between two parties whereby one
party called insurer undertakes, in charge for a fixed sum called premium, to the other party
called the insured, a fixed amount of money on the happening of a certain event. The
insurance company is called the insurer and the policy holder is called the insured.
Section 2 (25) of the Insurance Act 2010 states that insurer meansa. Any individual or unincorporated body of individuals or body corporate incorporated
under the law of any country or State outside Bangladesh carrying on insurance business
whichi.
Carries on that business in Bangladesh; or
ii.
has his or its principal place of business or is domiciled in Bangladesh; or
iii.
with the object of obtaining insurance business employs a representative, or
maintains a place of business in Bangladesh.
b. Anybody corporate carrying on this business of insurance, which is a body corporate
incorporated under any law for the time in force in Bangladesh; or States to any such
body corporate in the relation of a subsidiary company.
c. Any person who in Bangladesh has standing contract with underwriters who are members
of the society of Loyeds whereby such persons is authorized within the terms of such
contract to issue protection notes, cover note, or other documents granting insurance
cover to others on behalf of the underwriters.
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3. KINDS OF INSURANCE:
1.
2.
3.
4.
5.
Insurance can be divided into two types: life insurance and non-life
insurance.
Life insurance: Life insurance is different from other insurance in the sense
that here, the subject matter of insurance is life of human being. The insurer
will pay the fixed amount of insurance at the time of death or at the expiry of
certain period. At present, life insurance enjoys maximum scope because the
life is the most important property of the society or to an individual. Life
insurance business means the business of effecting contracts of insurance
upon human life. It includes:
i.
Any contract whereby the payment of money is assured upon death
(except death by accident only); or the happening of any contingency
dependent on human life;
ii.
Any contract which is subject to the payment of premiums for a term
dependent on human life;
iii. Any contract which includes the granting of disability and double or
triple indemnity accident benefits; the granting of annuities upon
human life, and the guaranteeing of superannuation allowances.
Non-life insurance: Non-life insurance business means fire, marine or
miscellaneous insurance business.
Marine insurance: Marine insurance has been defined as a contract
between insurer and insured whereby the insurer undertakes to indemnify
the insured in manner and to the interest thereby agreed, against marine
losses incident to marine adventure. Marine insurance business means the
business of effecting contracts of insurance upon vessels of any description,
including cargoes, freights and other interests which may be legally insured
in or in relation to such vessels, cargoes and freights, goods, wares,
merchandise and property of whatever description insured for any transit by
land or water or both, and whether or not including warehouse risks or
similar risks in addition or as incidental to such transit and includes any
other risks customarily included among the risks insured against in marine
insurance policies.
Fire insurance: Fire insurance is a device to compensate for the loss
consequent upon destruction by fire. Thus the fire insurer shifts the burden
of fire losses from their actual victims over to all the members of the society.
Miscellaneous Insurance: The property, goods, machine, furniture,
automobile, valuable articles etc. can be insured against the damage or
destruction due to accident or disappearance due to theft.
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