TN State Board 11th Commerce Important Questions Chapter 15 Insurance

Question 1.
List any five important type of policies.

  1. Whole life policy.
  2. Endowment life assurance policy.
  3. Joint life policy (JLP).
  4. Annuity Policy.
  5. Children’s Endowment policy.
  6. Fire Insurance.
  7. Marine Insurance.
  8. Health Insurance.
  9. General Insurance.

Samacheer Kalvi TN Board 11th Commerce Important Questions Chapter 15 Insurance

Question 2.
What is health insurance?

  1. In 1980’s most of the hospitals in India were government owned and treatment was free of cost. At the same time Insurance companies introduced ‘Mediclaim policy’ Health Insurance is taken as safeguard against rising medical costs.
  2. Disability resulting from illness or accident may be peril to family because it not only cuts off income but also creates large medical expenses.

Question 3.
Define Insurance.
“Insurance is a plan by themselves which large number of people associate and transfer to the shoulders of all, risk that attacks to individuals”.

Samacheer Kalvi TN Board 11th Commerce Important Questions Chapter 15 Insurance

Question 4.
Give the meaning of crop insurance.
This policy is to provide financial support to farmers in case of a crop failure due to drought or flood. It generally covers all risks of loss or damages relating to production of rice, wheat, millets, oil seeds and pulses etc.

Question 5.
Write a note on IRDAI.
IRDAI – Insurance Regulatory Development and Authority of India is the statutory, independent and apex body that governs, regulates and Supervises the Insurance Industry in India. It was constituted in the year 2000 by Parliament of India Act called IRDAI-Act, 1999. Presently IRDAI headquarters is in Hyderabad.

Organisational Setup of IRDAI: IRDAI is a ten member body consists of:

  1. One Chairman ( For 5 years & Maximum age -60 years).
  2. Five whole-time Members (Not 5 years and Maximum Age- 62).
  3. Four part-time Members (Not more than 5 years).
  4. The chairman and members of IRDA are appointed by the Government of India.

Samacheer Kalvi TN Board 11th Commerce Important Questions Chapter 15 Insurance

Question 6.
Explain the various types of Insurance.
Life Insurance:
Life Insurance maybe defined as a contract in which the insurance company called insurer undertakes to insure the life of a person called assured in exchange of a sum of money called premium which may be paid in one lump sum or monthly, quarterly, half yearly or yearly and promises to pay a certain sum of money either on the death of the assured or on expiry of certain period.

Non- Life Insurance:
It refers as the insurance not related to human but related to properties.

Fire Insurance:
Fire insurance is a contract whereby the insurer, in consideration of the premium paid, undertakes to make good any loss or damage caused by a fire during a specified period upto the amount specified in the policy.

A claim for loss by fire must satisfy the following two conditions:
(i) There must be actual loss; and
(ii) Fire must be accidental and non-intentional.

Marine Insurance:
Marine insurance is a contract of insurance under which the insurer undertakes to indemnify the insured in the manner and to the extent thereby agreed against marine losses. The insured pays the premium in consideration of the insurer’s (underwriter’s) guarantee to make good the losses arising from marine perils or perils of the sea.
Marine perils can be Collision of ship with the rock, fire, ship attacked by the enemies, etc.

Health Insurance:
In mid 80’s, most of the hospitals in India were government owned and treatment was free of cost. With the advent of Private Medical Care, the need for Health Insurance was felt and various Insurance Companies introduced Health Insurance as a Product. Presently the health insurance exists primarily in the form of ‘Mediclaim policy’.

Samacheer Kalvi TN Board 11th Commerce Important Questions Chapter 15 Insurance

Question 7.
Explain the principles of insurance.
(i) Utmost Good Faith:
According to this principle, both insurer and insured should enter into contract in good faith. Insured should provide all the information that impacts the subject matter. Insurer should provide all the details regarding insurance contract.

(ii) Insurable Interest:
The insured must have an insurable interest in the subject matter of insurance. Insurable interest means some pecuniary interest in the subject matter of the insurance contract, eg: A businessman has insurable interest in his stock of goods.

(iii) Indemnity:
Indemnity means security or compensation against loss or damages. In insurance, the insured would be compensated with the amount equivalent to the actual loss and not the amount exceeding the loss. This principle ensures that the insured does not make any profit out of the insurance. This principle of indemnity is applicable to property insurance alone.

eg: A businessman gets his stock of goods insured for ₹ 5,00,000. If the goods are destroyed by the fire, the insurance company will be liable to pay compensation for the loss caused to the insured. However, maximum compensation shall be ₹ 5,00,000 even if loss is more than this. “The principle of indemnity is not applicable to life insurance because one cannot estimate the loss due to the death of a person”.

(iv) Causa Proxima:
The word ‘Causaproxima’ means ‘nearest cause’. According to this principle, when the loss is the result of two or more cause, the proximate cause, i.e. the direct. The direct, the most dominant and most effective cause of loss should be taken into consideration. The insurance company is not liable for the remote cause.

(v) Contribution:
The same subject matter may be insured with more than one insurer then it is known as ‘Double Insurance’. In such a case, the insurance claim to be paid to the insured must be shared on contributed by all insurers in proportion to the sum assured by each one of them.

eg: A businessman gets his factory insured against fire for ₹ 10,00,000 with insurer A and ₹ 5,00,000 with insurer B. Due to fire, a loss of ₹ 1,50,000 occurred. Then, insurers A and B will contribute the loss in the ratio of 2 : 1. A will pay ₹ 1,00,000 and B will pay ? 50,000.

(vi) Subrogation:
Subrogation means ‘stepping the shoes on others’. According to this principle, once the claim of the insured has been settled, the ownership right of the subject matter of insurance passes on to the insurer.

eg: Mr. B gets his motor car insured. Some of its parts got damaged at a road accident. He gets the insurance claim and gets the damaged parts replaced with new ones. In this case the damaged parts will be taken by the insurance company. The insured has no right over the damaged parts since they had already got compensation for the damaged parts.

(vii) Mitigation:
In case of a mishap, the insured must take off all possible steps to reduce or mitigate the loss or damage to the subject matter of insurance.

Samacheer Kalvi TN Board 11th Commerce Important Questions Chapter 15 Insurance

Question 8.
Discuss the causes of risk.
Causes of Business Risks :
Business risks arise due to. a variety of causes, which are classified as follows:

(i) Natural Causes:
Human beings have little control over natural calamities like flood, earthquake, lightning, heavy rains, famine, etc. These result in heavy loss of life, property, and income in business.

(ii) Human Causes:
Human causes include such unexpected events like dishonesty, carelessness or negligence of employees, stoppage of work due to power failure, strikes, riots, management inefficiency, etc.

(iii) Economic Causes:
These include uncertainties relating to demand for goods, competition, price, collection of dues from customers, change of technology or method of production, etc. Financial problems like rise in interest rate for borrowing, levy of higher taxes, etc., also come under this type of causes as they result in higher unexpected cost of operation of business.

(iv) Other Causes:
These are unforeseen events like political disturbances, mechanical failures such as the bursting of boiler, fluctuations in exchange rates, etc. which lead to the possibility of business risks.

Samacheer Kalvi TN Board 11th Commerce Important Questions Chapter 15 Insurance

Question 9.

(a) Sanjana insured her factory for ₹ 5 Lakh against fire. Due to fire she suffered a loss of ₹ 2 lakh. How much amount she can recover from the insurance company? Why?
(i) Sanjana insured her factory value worth ₹ 5 lakhs against fire.
(ii) She suffered loss of ₹ 2 lakhs. She can get ₹ 2,00,000 only from insurance company.
(iii) If the loss due to fire exceeds ₹ 5,00,000 she cannot get actual loss on compensation (subject to average clause). She will get only ₹ 2,00,000.

(b) A factory owner gets his stock of goods insured, but he hides the fact the electricity board has issued him a statutory warning letter to get his factory’s wiring changed. Later on, the factory catches fire due to short circuit of wiring. Can he claim compensation?
No, he cannot claim compensation. Because already electricity board has issued him a statutory warning letter to get his factory’s wiring changed. Due to inadequate wiring the factory catches fire so he cannot get compensation.

Samacheer Kalvi TN Board 11th Commerce Important Questions Chapter 15 Insurance

Choose the Correct Answer:

Question 1.
The basic principle of insurance is:
(a) insurable interest
(b) co-operation
(c) subrogation
(d) proximate causa
(a) insurable interest

Question 2.
__________ is not a type of general insurance.
(a) Marine Insurance
(b) Life Insurance
(c) Fidelity Insurance
(d) Fire Insurance
(b) Life Insurance

Question 3.
Which of the following is not a function of insuranfce?
(a) Lending Funds
(b) Risk sharing
(c) Capital formation
(d) Protection of life
(d) Protection of life

Question 4.
Which of the following in not applicable in insurance contract?
(a) Unilateral contract
(b) Conditional contract
(c) Indemnity contract
(d) Inter-personal contract
(c) Indemnity contract

Question 5.
Which one of the following is a type of marine insurance?
(a) Money back
(b) Mediclaim
(c) Hull insurance
(d) Cargo insurance
(d) Cargo insurance

Samacheer Kalvi TN Board 11th Commerce Important Questions Chapter 15 Insurance

Samacheer Kalvi 11th Commerce Notes Chapter 15 Insurance

→ The life of every human being is exposed to many risks in the day to day life. Many people are affected by diseases: many meet accidents: These risks sometimes amount to death. In the same way business concerns also face with many uncertainties due to fire, flood, earthquake, disappearance of market due to change of fashions and tastes etc. so, any business is exposed to a lot of risks.

→ There is no business without involving risks. Giying protection against various kinds of risks is an important aspect in business activities. Insurance provides the protection against risks involved uncertainties in business as well as life. Insurance is nothing but socialization of risks. Insurance companies indemnify the loss of the insured.

→ A family generally depends on the income brought in by the bread winner. But when a death suddenly occurs, the family may be left in very different situation. Uncertainty is inherent in human life. Insurance substitutes this uncertainty by providing financial compensation.

TN Board 11th Commerce Important Questions