 Name : Mushahid Hussain

 S/o : Muhammad Panjal

 Caste : Bhellar
 Department : IBA University OF Sindh
 Subject : Principle of Insurance
 Topic :MID Term
 Roll No :2k19/BBAE/106
 Submitted By :MR. KHAWAR SHAIKH
QNO1: Define the term Insurance and its Function?
Ans: Insurance is an arrangement by which a company or the
state undertakes to provide a guarantee of compensation for
specified loss, damage, illness, or death in return for payment
of a specified premium.
Insurance is a contract, represented by a policy, in which an
individual or entity receives financial protection or
reimbursement against losses from an insurance company.

Function Of insurance:

 Provides Reliability
The main function of insurance is that eliminates the uncertainty
of an unexpected and sudden financial loss. This is one of the
biggest worries of a business.

 Protection

Insurance does not reduce the risk of loss or damage that a

company may suffer. But it provides a protection against such
loss that a company may suffer.
  Pooling of Risk

In insurance, all the policyholders pool their risks together. They

all pay their premiums and if one of them suffers financial losses,
then the payout comes from this fund.

 Legal Requirements

In a lot of cases getting some form of insurance is actually

required by the law of the land. Like for example when goods are
in freight, or when you open a public space getting fire insurance
may be a mandatory requirement.

 Capital Formation

The pooled premiums of the policyholders help create a capital

for the insurance company. This capital can then be invested in
productive purposes that generate income for the Company.

QNO2: Write a brief note on State Life Insurance?

Ans: "Life insurance provides a sum of money if the person who
is insured dies whilst the policy is in effect."
Advantages of Life Insurance:
 Life insurance provides an infusion of cash for dealing
with the adverse financial consequences of the
insured’s death.
 Life insurance enjoys favorable tax treatment unlike
any other financial instrument.
  Death benefits are generally income-tax-free to the
beneficiary.
 Death benefits may be estate-tax free if the policy
is owned properly.
 Cash values grow tax deferred during the insured’s
lifetime.
 Cash value withdrawals are treated on a first-in-
first-out (FIFO) basis, therefore cash value
withdrawals up to the total premiums paid are
generally income-tax free.
 Policy loans are income tax free.
 A life insurance policy may be exchanged for
another life insurance policy (or for an annuity)
without incurring current taxation.
Disadvantages of Life Insurance:
 Policyholders forego some current expenditure to pay
policy premiums. Moreover, life insurance is typically
purchased for the benefit of others and usually only
indirectly for the insured person.
 Cash surrender values are usually less than the
premiums paid in the first several policy years and
sometimes a policy owner may not recover the
premiums paid if the policy is surrendered.
 The life insurance purchase decision and the
positioning of the life insurance can be complex
especially if the insurance is for estate planning,
business situations or complex family situations.
  The life insurance acquisition process can be annoying
and perplexing.

Qno3: What Principle define the Insurance contract?

Ans :

Principles of Insurance
Insurance policies are contracts that provide people
with financial security and protection from future uncertainty

Indemnity:

The principle of indemnity ensures that an insurance contract

protects you from and compensates you for any damage, loss,
or injury. The purpose of an insurance contract is to make you
"whole" in the event of a loss, not to allow you to make a profit.

Subrogation:

Subrogation means that one party stands in for another. In the

insurance context, subrogation will arise if you are injured by a
negligent third party, and your insurance company reimburses
you for your damages.

Contribution:

Contribution is a similar principle to indemnity, and it applies to

situations where you have more than one insurance policy for
the same asset or entity.
Minimization:

The owner of an insurance policy, you have an obligation to

take necessary steps to minimize the loss of your insured
property. The law doesn't allow you to be negligent or
irresponsible just because you know you're insured.

Qno: What is the role of each insurance intermediaries?

Ans: The importance of insurance in modern economies is

unquestioned and has been recognized for centuries. Insurance
“is practically a necessity to business activity and enterprise.”

Insurance is an essential element in the operation of

sophisticated national economies throughout the world today.
Insurance enables businesses to operate in a cost-effective
manner by providing risk transfer mechanisms whereby risks
associated with business activities are assumed by third parties.
It allows businesses to take on credit that otherwise would be
unavailable from banks and other credit-providers fearful of
losing their capital without such protection, and it provides
protection against the business risks of expanding into
unfamiliar territory – new locations, products or services –
which is critical for encouraging risk taking and creating and
ensuring economic growth.

Qno: Explain the Conditions necessary for insurance in detail?

Ans: The section of an insurance policy that identifies general
requirements of an insured and the insurer on matters such as
loss reporting and settlement, property valuation, other
insurance, subrogation rights, and cancellation and non
renewal. The policy conditions are usually stipulated in the
coverage form of the insurance policy.