GENERAL INSURANCE

GENERAL INSURANCE

Any insurance other than ‘life insurance’ comes under the category of general insurance. It could also be termed as ‘non life insurance’.

General insurance comprises of insurance of property against fire, theft, personal insurance which covered legal liabilities etc.

General insurance has evolved with the evolution of business and lifestyle of people.

Insurance being a contract requires the offer and acceptance as its main essentials. Most general insurance covers are annual contracts and expire at the end of one year and must be renewed immediately if the insurer wants to extend the policy for the next year.

IMPORTANCE OF GENERAL INSURANCE

Monetary Protection: General insurance gives monetary protection to the insurer. Fire insurance not only includes risk of fire, it extends to loss of profit but to damage caused by any of the risk that arises from fire.

Protection against risk: General insurance removes the worry and fear associated with several business risks, making it easy to carry out certain economic activities. Thus, it encourages entrepreneurial expansion of an economy.

Retention of Individual accidents and losses: Before accepting the risk, the insurer surveys and assesses the risk. In this process, not only prices are put to the risk but also recommendations are made of ways and means to improve risk. Engineering surveys plan an important part in prevention of industrial accidents and losses.

Investment in infrastructural development: Most of the insurance companies invest the premiums received in conservative and long term opportunities like roads, ports, highways, bridges, etc. Consequently, insurance company contribute significantly to economic development.

Protection of capital: Insurance helps protect capital employed in industry and economic activity. Those who insure can protect their assets form an increasing set of perils and risk.

Collateral security: Banks and financial institutions lend money to industrial and commercial undertaking only on the basis of collateral security of insurance. No banks would advance loans against assets or property unless they are fully insured.

Increasing productivity and saving national wealth: It gives protection and safety to insurer, raises the rate of capital formation and contributes to economic development thereby increasing productivity and saving national wealth.

Enables foreign trade: Insurance makes foreign trade possible almost in totality, besides it stands with shipping as one of the key revenue earners.

Protection to rural economy: Cattle, livestock and agricultural crop insurance schemes provide the necessary financial protection to the rural economy.

 

ESSENTIALS OF GENERAL INSURANCE CONTRACT

Evidence: The insured pays premium to the insurance company i.e. insurer and the insurer accepts the risk, the contract of insurance is concluded. The policy then issued is the ‘evidence’ for that contract.

Offer and acceptance: The contract is completed when the proposer makes an offer the insurer accepts the offer. The insurance cover note it treated as an acceptance of the offer. Based on the cover note the customer can proceed to make a claim of eligible.

Consideration: In general insurance contract, the premium paid by the insured to an insured is consideration, and the consideration for the insured is the indemnity promise made by the insurer.

Purpose: The purpose of general insurance should not be against the public policy.

Capacity: People entering into contract must be authorized and competent to enter into the general contract.

CATEGORIES OF GENERAL INSURANCE

In India, the concept of general insurance consists of three categories

1. Marine Insuance: Risk to loss and risk of damage to cargo.

2. Fire Insurance: Covers loss / damage of property against the risk of fire, flood, earthquakes, etc.

3. Miscellaneous Insurance: Covers all types of risk other than Marine and fire Insurance e.g. Health Insurance, Motor Insurance, Home Insurance, etc.