Types of Insurance

Insurance can be classified into two categories:

1. Life insurance
2. Non-life insurance

Life Insurance

Life insurance is one of the common forms of insurance. It has secured a special position all over the world. It is estimated that life insurance comprises 80 percent of the total insurance business done in the world. It was started in England and other European countries in the 16^thcentury. The life insurance in modern lines was developed in the 18^thcentury. Life insurance is considered as an investment as the insured gets the amount of insurance with a bonus on the maturity of the policy. It is considered as protection as the nominee gets the financial compensation in the case of the death of the insured. It is also known as a contingent contract because the loss of the life cannot be compensated, but the financial compensation is provided to the nominee for the loss of insured life.

The following are the main definitions of life insurance: -

“Life insurance contract may be defined as the contract whereby the insurer in the consideration of a premium undertakes to pay a certain sum of money either on a death of the insured or on the expiry of the fixed period.” – M. N. Mishra

“The life insurance contract embodies an agreement, in which, broadly stated the insurer undertakes to pay a stipulated sum upon the death of the insured, or at some designated time to designated beneficiary.” – John H. Maggee

From the above definition, it can be concluded that life insurance is the contract in which the insured agrees to pay the premium to the insurer against which the insurer promises to compensate the insured a sum of money on the happening of an event. It contains the elements of investment as well as protection.

Non-life insurance/ General insurance

Non- life insurance refers to the insurance of goods and properties. The insurance which is done for the physical properties other than human life is known as non-life insurance. Non- life insurance is taken as a means of providing financial protection for building, machinery, equipment, furniture, and vehicle and merchandise items against the risk of fire, earthquake, accident and theft. Non-life insurance includes fire insurance, marine insurance, and miscellaneous insurance.

Fire Insurance

Fire insurance is a type of insurance, which is taken for getting financial compensation for the loss by fire. It is a contract in which the insurer promises to pay a certain sum of money to the insured in case of loss of properties caused by setting a fire within specified period of time. On the other hand, the insured agrees to pay the amount of premium in consideration. Thus, fire insurance provides the financial compensation against the loss or damage of the physical goods or properties.

The following are the main definitions of fire insurance: -

“Fire insurance is a device to compensate for the loss consequent upon destruction by fire.” – M. N. Mishra

From the above definition, it is clear that fire insurance is a contract of indemnity under which the insured cannot claim anything more than the value of goods lost by fire or the amount insured, whichever is less. Fire insurance is a recent growth. The first fire insurance institution was established only after the “Great fire of London” in 1666 A.D.

Marine Insurance

Marine insurance is a type of insurance, which is taken for getting the financial compensation against the losses due to perils of the sea in the course of a sea voyage. It is the contract made between the insurers and insured to indemnify against the cursor damage of goods using a ship. There may be different risk such as accident ship, collision, jettison, barratry etc. The subject matter of the marine insurance is a ship, cargo, and freight. The premium is paid periodically or in a lump sum by the insured to the insurer.

The following are the main definitions of marine insurance: -

“Marine insurance is a contract whereby the insurer undertakes to indemnify the insured in a manner and to the extent thereby agreed, against marine losses, that is to say, the losses incidental to marine adventures,” – Indian Marine Insurance Act, 1963

From the above definition, it is obvious that marine insurance is a contract between the insurer and the insured whereby the insurer undertakes to indemnify the insured upon the happening of the marine perils against the consideration of certain payment called premium.

Miscellaneous Insurance

The following are some common types of miscellaneous insurance: -

1. Motor insurance
   The insurance which is done in order to get the financial compensation for the loss of motor or similar types of vehicles caused by accident, theft or other risk is called motor insurance. While traveling on land using car, bus, van, truck, etc. If the accident took place and happened the events, the insurer compensates for the loss. Thus, it compensates the loss of goods and amount for the death of passenger and loss of vehicles separately. It is compulsory in Nepal.
   
   
2. Employer’s liability insurance
   General insurance also includes employer’s liability insurance. Under it, an insurance policy is taken for the workers of factories or institutions by the employer to compensate the claim of the employees in the event of injury, accident, death and disability while they are at work. Institutions or factories pay the premium regularly to the insurance company for getting such kind of compensation. The insurance company compensates at the time of injury, accident, disability or death of the workers.
   
   
3. Aviation insurance
   Nowadays, air transportation is a popular means of transportation. Sometimes, an accident may take place in the air service. If the accident takes place in the air service, the losses are unbearable. Hence, the aviation insurance is inevitable. In this reality, aviation insurance policy is taken for getting financial compensation for the losses in air service.