UNIVERSITY EXAMINATION – MARCH 2020

I - B.COM - Computer Application

NON – MAJOR ELECTIVE PAPER
BASICS OF BUSINESS INSURANCE
(Semester – II)

SUB CODE: CNE2B Class: I B.Com CA

Max. Marks: 75

SECTION – A (10x2=20 Marks)

Answer any TEN Questions
1. What is Insurance?
2. Who is insured? 
3. What is Life Insurance?
4. Abbreviate IRDA
5. Abbreviate ULIP
6. What is General Insurance?
7. What is fire insurance?
8. What is Endowment policy?
9. What is mediclaim insurance?
10. What is Money Back Plans?
11. What is motor insurance?
12. Mention any two Private Life Insurance Companies in India

SECTION – B (5x5=25 Marks)

Answer any FIVE Questions

13. What are the Benefits of Life Insurance policies?

14. Write a note on Unit Linked Plans (ULIPs)
15. What is covered in a motor insurance policy?
16. What are the functions of IRDA?
17. Explain evolution of Insurance Industry in India
18. List out the Government Life Insurance Companies
19. What are the Objectives of Insurance?
SECTION – C (3x10=30 Marks)
Answer any THREE Questions

20. Explain various Types of Insurance

21. Explain the Principles of Insurance?
22. Briefly discuss the types of Health insurance plans in India
23. Briefly explain various Benefits of Insurance
24. Explain various insurance related government schemes

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NMEC – I B.Com CA – Semester – II – 2018
BASICS OF BUSINESS INSURANCE

Basics of Business Insurance

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 Syllabus

Unit – I
Introduction to Insurance – Types of Insurance – Principles of Insurance

Unit – II
Salient Features of IRDA – Administration of IRDA Act – Regulatory Measures
of IRDA

Unit – III
Life Insurance Products – Term, Whole Life, Endowment

Unit – IV
Introduction to General Insurance – Fire, Marine and Motor Insurance

Unit – V
Government and Insurance Companies – LIC India – Private Players in
Insurance in India

FAQ - Questions and Answers

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1. What is Insurance?
 Insurance is a means of protection from financial loss.
 It is a form of risk management primarily used to avoid the risk of a contingent,
uncertain loss.
 It is a “Little Price - For a Priceless Security.”

2. Who is insured? 
 The person who gets his property/life insured is known as insured

3. What is Life Insurance?

 Life insurance is a contract between an insurer and a policyholder in which the insurer
guarantees payment of a death benefit to named beneficiaries upon the death of
the insured.

4. Abbreviate IRDA
 Insurance Regulatory and Development Authority (IRDA)
 A legal body tasked with regulating and promoting the insurance and re-insurance
industries in India

5. Abbreviate ULIP
 Unit Linked Insurance Policy.
 A ULIP is a life insurance policy which provides a combination of risk cover and
investment

6. What is General Insurance?

 General insurance is insurance for valuables other than our life and health.
 General insurance covers the insurer against damage, loss and theft of your valuables. 

7. What is fire insurance?

 Fire insurance is property insurance that covers damage and losses caused by fire.
 The purchase of fire insurance helps to cover the cost of replacement, repair, or
reconstruction of property

8. What is Endowment policy?

 Endowment policy is a life insurance contract designed to pay a lump sum amount after
on its maturity or on death.
 Typical maturity terms are 10, 15 or 20 years up to a certain age limit.

9. What is mediclaim insurance?

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  Mediclaim policy is nothing but a health insurance policy 
 It is designed to take care of one's healthcare expenses up to the sum assured, in case
the person faces any type of medical emergency, or an accident that has led to
hospitalization.

10. What is Money Back Plans?

 It is a popular insurance policy. 
 In a money back plan, the insured person gets a percentage of sum assured at regular
intervals, instead of getting the lump sum amount at the end of the term.

11. What is Motor Insurance?

 Motor insurance is the insurance policy for vehicles.
 It could include Car Insurance and Two-Wheeler Insurance.

12. Mention any two Private Life Insurance Companies in India

1. ICICI Prudential Life Insurance
2. IDBI Federal Life Insurance
3. Max Life Insurance
4. Reliance Life Insurance

13. What are the Benefits of Life Insurance policies?

1. Risk Coverage: Insurance provides risk coverage to the insured family in form of
monetary compensation in lieu of premium paid.
2. Difference plans for different uses: Insurance companies offer a different type of plan
to the insured depending on his need for insurance. More benefits come with the more
premium.
3. Cover for Health Expenses: These policies also cover hospitalization expenses and
critical illness treatment.
4. Promotes Savings/ Helps in Wealth creation: Insurance policies also come with the
saving plan i.e. they invest your money in profitable ventures.
5. Guaranteed Income:  Insurance policies come with the guaranteed sum assured amount
which is payable on happening of the event.
6. Loan Facility: Insurance companies provide the option to the insured that they can
borrow a certain sum of amount. This option is available on selected policies only.  
7. Tax Benefits: Insurance premium is tax deductible under section 80C of the income tax
Act, 1961.

14. Write a note on Unit Linked Plans (ULIPs)

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  A unit linked plan is a comprehensive combination of insurance and investment.
 The premium paid towards ULIP is partly used as a risk cover (insurance) and partly is
invested in funds.
 One can invest in different funds offered by the insurance company depending on his
risk appetite. The insurance company then invests the accumulated amount in the
capital market i.e. in bonds, equities, debts, market funds, or a hybrid funds...
SUM ANNUAL
TERM FUND VALUE
ASSURED PREMIUM
20 Depending on the fund value
Rs.2 lakh Rs.20,000
years at the time of maturity.

15. What is covered in a motor insurance policy?

1. Loss or damage to your vehicle due to natural calamities: This could include fire,
explosion, lightning, earthquake, flood, typhoon, hurricane and landslide.
2. Loss or damage to your vehicle due to man-made calamities such as burglary, theft, riot,
or a hateful act.
3. Third Party Legal Liability: Protection against legal liability due to accidental damages
resulting in the permanent injury or death of a person, and damage caused to the
surrounding property.
4. In general, auto insurance does not cover depreciation, wear and tear or mechanical
breakdown.

16. What are the functions of IRDA?

 IRDA was setup in 2000 as an autonomous body. 
 The main objective of setting up IRDA was to promote market efficiency and ensure
consumer protection
 IRDA is the controlling and regulatory apex body in the country for Insurance sector
Functions of IRDA
1. Ensure orderly growth of Insurance industry
2. Protection of interest of policy holders.
3. Issue consumer protection guidelines to insurance companies.
4. Grant, modify, and suspend license for insurance companies.
5. Lay down procedure for accounting policies to be adopted by the Insurance companies. 

17. Explain evolution of Insurance Industry in India

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18. List out the Government Life Insurance Companies
1. Life Insurance Corporation of India
2. United India Insurance Company
3. The Oriental Insurance Company Ltd
4. National Insurance
5. The New India Assurance Co. Ltd
6. United India Insurance Company Limited
7. The Oriental Insurance Company Limited
8. Agriculture Insurance Company Of India Limited

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19. What are the Objectives of Insurance?

1. Granting Security to People

 Insurance primarily serves the purpose of granting security against losses and damages
to people. 
2. Minimisation of losses
 Insurance aims at minimisation of losses arising from future risks and uncertainties.
3. 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. 
4. Reduces the Anxiety and Fear
 Insurance policies relieves the individuals of any tension and fear regarding the future
risks and uncertainties.
5. 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.
6. Generation of Capital
 Insurance companies leads to capital generation by collecting large amount of funds
from public. 

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20. Explain various Types of Insurance

1. Life Insurance
 Life Insurance is different from other insurance in the sense that, here, the subject
matter of insurance is the life of a human being.
2. General Insurance
 General insurance includes Property Insurance, Liability Insurance, and Other Forms of
Insurance.
3. Property Insurance
 Under the property insurance property of person/persons are insured against a certain
specified risk. The risk may be fire or marine perils, theft of property or goods damage to
property at the accident.
4. Marine Insurance
 Marine insurance provides protection against the loss of marine perils.
 The marine perils are; collision with a rock or ship, attacks by enemies, fire, and
captured by pirates, etc.
5. Fire Insurance
 Fire Insurance covers the risk of fire.
 In the absence of fire insurance, the fire waste will increase not only to the individual
but to the society as well.
6. Liability Insurance
 The general Insurance also includes liability insurance whereby the insured is liable to
pay the damage of property or to compensate for the loss of persona; injury or death.
7. Social Insurance
 The social insurance is to provide protection to the weaker sections of the society who
are unable to pay the premium for adequate insurance.

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21. Explain the Principles of Insurance?

1. Principle of Utmost Good Faith

 It states that both the parties to contract must enter into a contract in good faith.
2. Principle of Indemnity
 Principle of indemnity means insurance contracts are done to provide protection and
compensate against uncertain losses, damages or injuries.  
3. Principle of Insurable Interest
 This principle states that insurance policy holder must have insurable interest in the
subject matter of insurance.
4. Principle of Subrogation
 Principle of subrogation states that after paying compensation, the ownership right of
property will transfer from insured to insurer. 
5. Principle of Loss Minimization
 This principle states that insured should always take all necessary steps to avoid losses
and damages to insured property. 
6. Principle of Contribution
 Principle of contribution states that insured cannot make profit by insuring the property
with more than one insurance company. 
7. Principle of Causa Proxima
 Causa proxima means the ‘direct cause’ or ‘nearest cause’. The principles of Causa
proxima are applicable when there are series of causes for losses or damages to insured
property.

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22. Briefly discuss the types of Health insurance plans in India

Health Insurance
 Health insurance, like other forms of insurance, is a form of collectivism by means of
which people collectively pool their risk, in this case the risk of incurring medical
expenses.
Types of Health Insurance Plans
1. Individual health plan
2. Family floater plan
3. Senior Citizens’ plan
4. Critical illness plan
5. Daily hospital cash and
6. Unit-linked health plan (ULHP).

1. Individual Health Plans: Largely, an individual health insurance plan (IHIP), or ‘mediclaim’,

would cover expenses if you are hospitalised for at least 24 hours.

2. Family Floater Plans: This is a fairly new entrant in the health insurance firmament. It takes
advantage of the fact that the possibility of all members of a family falling ill at the same
time or within the same year is low.

3. Senior Citizens’ Plans: Insurance is considered a form of long-term savings for senior
citizens. This money provides financial stability and also helps them in times of need. 

4. Critical Illness Plans: A Critical Illness plan means to insure against the risk of serious illness.
It will give the same security of knowing that a guaranteed cash sum will be paid if the
unexpected happens and one is diagnosed with a critical illness. 

5. Daily Hospital Cash Expense: Benefit is paid on per day basis after hospitalization (most
plans mandate at least 48 hours of hospitalization). The pre-decided daily benefit amount is
paid in full, irrespective of the actual expenses. 

6. Unit-linked health plan (ULHP): All ULHPs offer one or more combination of the other
benefits (for which risk premium is deducted from fund value). Also, charges such as
premium allocation charge and policy administration charge are deducted from the fund
value.

23. Briefly explain various Benefits of Insurance

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Benefit of insurance can be divided into these categories -

1.   Benefits to Individual
2    Benefits to Business or Industry
3.   Benefits to the Society   
It can be explained as under -
1.   Benefits to Individual
(a)  Insurance provides security & safety: Insurance gives a sense of security to the policy
holder. Insurance provide security and safety against the loss of earning at death or in old age,
against the loss at fire, against the loss at damage, destruction of property, goods, furniture etc.
Life insurance provides protection to the dependents in case of death of policyholders and to
the policyholder in old age. Fire insurance insured the property against loss on a fire. Similarly
other insurance provide security against the loss by indemnifying to the extent of actual loss.
(b) Encourage Savings: Life insurance is best form of saving. The insured person must regularly
save out of his current income an amount equal to the premium to be paid otherwise his policy
get lapsed if premium is not paid on time.

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(c)  Providing Investment Opportunity: Life insurance provides different policies in which
individual can invest smoothly and with security; like endowment policies, deferred annuities
etc. There is special exemption in the Income Tax, Wealth Tax etc. regarding this type of
investment
2    Benefits to Business or Industry
(a)  Shifting of Risk: Insurance is a social device whereby businessmen shift specific risks to the
insurance company. This helps the businessmen to concentrate more on important business
issues.
(b) Assuring Expected Profits: An insured businessman or policyholder can enjoy normal
expected profits as he would not be required to make provisions or allocate funds for meeting
future contingencies.
(c)  Improve Credit Standing: Insured assets are easily accepted as security for loans by the
banks and financial institutions so insurance improve credit standing of the business firm
(d) Business Continuation – With the help of property insurance, the property of business is
protected against disasters and chance of closure of business is reduced
3.   Benefits to the Society
(a)  Capital Formation: As institutional investors, insurance companies provide funds for
financing economic development. They mobilize the saving of the people and invest these
saving into more productive channels
(b) Generating Employment Opportunities: With the growth of the insurance business, the
insurance companies are creating more and more employment opportunities.
(c)  Promoting Social Welfare: Policies like old age pension scheme, policies for education,
marriage provide sense of security to the policyholders and thus ensure social welfare.

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24. Explain various insurance related government schemes

1. Pradhan Mantri Fasal Bima Yojana (PMFBY)

 Purpose: It is a crop insurance scheme that compensates farmers if any of the notified
crops fail due to natural calamities, pests and diseases. The scheme not just insulates
the farmer from income shocks, but also encourage them to adopt modern agricultural
practices.
 Launch Year: 2016
 It has replaced the National Agricultural Insurance Scheme (NAIS) and Modified National
Agricultural Insurance Scheme (MNAIS).

2. Pradhan Mantri Jeevan Jyoti Bima Yojana

 Purpose: It is an insurance scheme by Government of India that provides life insurance
for death due to any reason. It provides one year life cover, renewable from year to
year. The cover period under these Schemes is 1st June of each year to 31st May of
subsequent year.
 Launch Date: 9th May, 2015

3. Pradhan Mantri Suraksha Bima Yojana

 Purpose: It is an Accidental Insurance Scheme that offers death and disability covers for
death or disability occurred due to accident. It is a one year scheme that may be
renewed on year to year basis. The cover period under these Schemes is 1st June of
each year to 31st May of subsequent year.
 Launch Date: 9th May, 2015

4. Pradhan Mantri Vaya Vandana Yojana (PMVVY) /

 Purpose: PMVVY is an immediate Annuity pension plan. Under this scheme, a person of
age more than 60 years can invest a lump sum amount known as purchase price and get
monthly/quarterly/semi-annually or annual pension as per his/her choice. It offers
assured pension of 8%.

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