ASSIGNMENT

Submitted to: Sir Hassan Mujtaba

Submitted by: Nimra Fazal 409
Course: (BBA2-PU)
Topic:Types of Insurance and its merits and demerits.
Types of Insurance and its merits and demerits.
Insurance is a means of protection from financial loss. It is a form of risk
management, primarily used to hedge against the risk of a contingent or uncertain
loss. An entity which provides insurance is known as an insurer, an insurance
company, an insurance carrier or an underwriter.

Types of Insurance
There are 7 Types of Insurance are;

1. Life Insurance orPersonal Insurance

2. Property Insurance
3. Marine Insurance
4. Fire Insurance
5. Liability Insurance
6. Guarantee Insurance
7. Social Insurance
Insurance is categorized based on risk, type, and hazards.

These are explained below.

Life Insurance orPersonal Insurance: Life insurance is a contract between

an insurer and a policy owner. A life insurance policy guarantees the insurer pays a
sum of money to named beneficiaries when the insured dies in exchange for the
premiums paid by the policyholder during their lifetime. This insurance provides
protection to the family at the premature death or gives an adequate amount at the
old age when earning capacities are reduced. Under personal insurance, a payment
is made at the accident.

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.
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. these perils cause damage, destruction or disappearance of
the ship and cargo and non-payment of freight.
So, marine insurance insures ship (Hull), cargo and freight.

Fire Insurance: With the help of fire insurance, the losses arising due to fire are
compensated and the society is not losing much.The individual is preferred from
such losses and his property or business or industry will remain approximately in
the same position in which it was before the loss.
The fire insurance does not protect only losses but it provides certain consequential
losses also war risk, turmoil, riots, etc. can be insured under this insurance, too.

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.This insurance is seen in the form of fidelity
insurance, automobile insurance, and machine insurance, etc.

Guarantee Insurance: The guarantee insurance covers the loss arising due to
dishonesty, disappearance, and disloyalty of the employees or second party. The
party must be a party to the contract. His failure causes loss to the first party.
For example, in export insurance, the insurer will compensate the loss at the failure
of the importers to pay the amount of debt.

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.
Pension plans, disability benefits, unemployment benefits, sickness insurance, and
industrial insurance are the various forms of social insurance.

 Other Forms of Insurance

Besides the property and liability insurances, there are other insurances that are
included in general insurance.
Examples of such insurances are export-credit insurances, State employees’
insurance, etc. whereby the insurer guarantees to pay a certain amount at certain
events.This insurance is extending rapidly these days.

 Miscellaneous Insurance

The property, goods, machine, Furniture, automobiles, valuable articles, etc. can be
insured against the damage or destruction due to accident or disappearance due to
theft.
There are different forms of insurances for each type of the said property whereby
not only property insurance exists but liability insurance and personal injuries are
also the insurer.

Merits and Demerits of Insurance

MERITS:
1. Financial Protection

In life, there is no such thing as a guarantee. There may be a loss of life, as well as
some business accidents. The loss is difficult to bear in both of these cases. As a
result, insurance provides financial protection against such a sudden loss.

2.DistributionofRisk/SpreadingofRisk
The underlying concept of insurance is to spread the risk across a large number of
people. People pay a certain amount to an insurance company up to a certain time
or lifetime and receive a refund if a loss occurs. Risk in life or business cannot be
eliminated, but it can be reduced, distributed, or shared. So, in this case, insurance
companies bear risks in order to redistribute business and individual risks among
insurance companies.

3.Stability of Living Standard

Insurance provides financial support to ensure that people can sustain and maintain
stability in living standards against an unforeseen risk of losses.

4. Encouragement to Savings
In insurance, people pay a certain amount of money for a fixed time or lifetime
based on an agreement and this helps to develop a habit of saving money. Knowing
the importance of saving, people start doing saving in various fields.
 5.Job Opportunities
Insurance, like any other business, is a successful business model. It targets many
entrepreneurs and business owners. As a result, there is a lot of cash flow in the
business. They need employees to handle and maintain cash flow and run the
business, so they open vacancies in various positions based on qualifications and
provide job opportunities.

 6.Promotes foreign/international trades

Many years ago, people were afraid to engage in international trade because of the
possibility of accidents while transporting goods via ships, roads, or other modes
of transportation. However, in today's competitive global economy, insurance
companies bear all of those risks and compensate for losses. They also protect an
exporter of goods and services from nonpayment by a foreign buyer.

7. Loan Facilities

If a company has purchased insurance, banks are more likely to lend to that
company. No, the problem for large businesses is getting a loan from a bank, but if
you have a small business or a startup and have done business insurance, your
chances of getting a loan from a bank increase.

8. Stability of Business

Even if your company suffers unexpected losses, insurance can help you manage
your losses. Taking out an insurance policy for your employees will encourage
them to come into the office. As a result, insurance aids in the smooth operation of
the office. And business will become more stable.

9. Increase in investment

Insurance promotes individuals and businesses to invest in new things.

 10.Competitiveness

If you have insurance, then there will not be any tension related to business, and
life, and health. so, you can focus on your task and compete with others.

11. Society and Country Welfare

The insurance company collects a large amount of money from an insured and they
invest in the development of trade and industry, which finally leads the society and
country toward development.
 

 12.Preserves Confidentiality
If there is some death in the family then the death benefit or to whom the death
benefits is payable will not be recorded publicly. This helps to preserve
confidentiality for the beneficiary of the policy.
 
13. Tax-free money
Another advantage of insurance is that the funds are often tax-delayed. The
benefits and all other earnings you may earn under the policy are tax-free, except
in the case of employer insurance schemes where benefits are regarded as normal
taxable income.

14. Short Term Coverage

The insurance coverage period can be changed. If you have short-term needs then
you can choose shorter-length insurance.
 
15. Long Term Coverage
Long-term insurance is an option if you have long-term needs. It may be more
cost-effective in some situations in the long run compared to short-term;coverage.
You can use life insurance to pay for other policies such as pensions or long-term
care without paying taxes on the difference.

16.Easy to Apply
There are many genuine sources where you can get insurance information and
compare insurance of one company with another and can apply online form as
well. Example:policygenius 

DEMERITS:
Insurance also has some defects in it. Some of them are as follows:

1 1.Term and Conditions

Insurance does not cover every type of loss that can happen to an individual or a
business. They have terms and conditions, and they only provide financial
assistance based on those terms. Please read the terms and conditions of any
insurance before purchasing it. Also, seek assistance from the appropriate person in
order to obtain accurate information about an insurance policy.
2. Long Legal formalities

It may take a long legal procedure for receiving your claims.

3. Fraud Agency

There are lots of fraud agencies available in the market so, before taking any type
of insurance does exercise yourself or take the help of an expert.

4. Not for all People

Some insurance, such as life and health insurance, do not cover sick or elderly
people in most cases. Their insurance may be costly. Do your homework before
enrolling in insurance.

5. Potential crime incidents

It could lead to social crimes as the users of the policy are tempted to commit
crimes to get the insured money.

6. Temporary and Termination

Insurance is temporary and will be
terminated when the individual no longer belongs to the group.
 
7. Can be Expensive
Often, the cost can vary depending on the policy and other factors. However, if you
buy at the right time, for the right reasons, and with the right coverage, you may be
able to get the best price.
 
8. Rise in Subsequent Premium
Many insurance firms have different subsequent premium rates, and you should
pay special attention to them. Before you purchase a policy, ensure that you know
at the start, whether your premium is guaranteed throughout the policy, or whether
inflation shifts from time to time.

9. Because of a lack of efficient awareness, everyone is not able to get knowledge

of insurance, so may needs agents and have to pay an extra amount for him.0Some
insurance will not pay back if the policyholder never suffers from the
loss. Often, if the program is surrendered, a political holder cannot recover the pre
mium.
 10. Adds Expense For Some Projects
In some construction projects where compensation for the workers for injuries are
common, then insurance for these company can be expensive. They are expensive
as compared to other IT and accounting offices.

 11.Annoying and Frustration

Many claims in insurance are required to fulfill and checking all of them takes time
and energy which annoys the people and may lead to frustration. So, it's better
good to know insurance you have done properly.

 
Conclusion:
Insurance is critical and should be obtained by everyone in order to ensure a happy
and secure future for future generations.

THE END