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Business Services-1 · Gujarat Board (GSEB) STD 11 Commerce (GSEB - English Medium). 16 questions.

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Question 15 Marks
Show the classifications of warehouse with the help of chart. Explain custom duty paid warehouse.
Answer
  • Introduction :
    • Warehouse services are inevitable in the fast development age of today.
    • It is a must for trade and commerce.
    • Manufactures products with the expectation of high demand product has to be stored in the godown till its demand arises in the market.
    • Beside this certain raw- material is available only during specific season.
    • The consumption of particular product is through oit the year .
    • So it is stored in a godown e.g. Sugar cane , wheat, rice etc.
    • Various types of godown do exist to day with different objectives.
  • The meaning of Godown / warehouse :
    • warehouse is a store of product on which minimum alteration has occurred and its original form and property is maintained.
      • types of warehouse from the view point of Ownership :
        • Private Godown / warehouse :
          • when traders or manufactures according to their need keep their own godown in the area they find proper and suitable to store their product is called private warehouse.
        • Public Godown :
          • the godowns used not only for ones self but for public are public , Godowns . the ownership of this warehouse lies with person or institution . the person who desires to store his goods in this godowns pays rent and the expense of store.
          • This type of warehouse are very near to railway stations. Ports and airports, Receipt is given regarding the goods kept in such godowns. Against money goods are transferred by transferring by receipts and purchase and sale is carried out.
          • This type of godowns guarantee foe maintenance and security of goods stored there in. to day services of public godowns has become a developing business.
      • Types of warehouse from the view point of customs duty :
          • Two types are as below.
          • Warehouse of customs duty paid goods :
            • The importer has paid excise on the goods he has imported and does not want to take it to the specific place immediately.
            • He keep the good in the godown nearest o the place where he has imported the goods.
            • The service of this type of godowns are available on parts, airports and in the front (border ) areas.
          • Warehouse of goods on which custom duty is not paid (Bonded godown):
            • When the goods imported are to be exported or one has not been able to pay custom duty immediately . the goods are kept in the bonded godown till the custom duty paid.
            • Such godowns are called ‘godown without having paid custom duty on good’.
            • Such godowns are on the front (border ) and on the ports where goods are imported. In the type of godowns goods are maintained as well as classified and repacked .
            • Imported goods are repacked in big or small packing without having made by change in the goods.
            • Fixed expense and rent is paid for this service.
        • Type of godown from the view point of use : Two type area as below.
          • Ordinary Use :
            • No special service is provided for storing, maintaining and protecting goods in the godown is known as ordinary godown.
          • Special Warehouse :
            • Special facility is required to preserve fruits , vegetables, dairy products and other perishable goods, crackers , poisonous chemicals , petrol etc. cold storage also is required to preserve food items.
            • Storage of petrol and diesel is done in the underground tank, special types of bricks are required to store poisonous chemicals and substances.
            • Certain medicines , Cosmetics are kept in air – tight containers.
  • Conclusion :
    • Various type of warehouse are inevitable in developing trade and commerce .
    • Continuity of the flow of supply has been possible due to the facility of godown and the demands of customers have been satisfied .
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Question 25 Marks
Write a note on Insurance Regulatory Development Authority $(IRDA)$
Answer
  • Establishment of Insurance Regulatory Development Authority $(IRDA)$ :
    • To supervise the functioning of insurance sector government of India has established in 1999, the Insurance Regulatory Development Authority on the basic of the report of the committee formed by the government of India. Provision is made for foreign insurance companies for business collaboration with Indian Insurance companies.
  • Role Of $IRDA$ :
    • Insurance Regulatory and Development Authority is India’s Supreme autonomous legal institution.
    • This institution looks after regulation and development of insurance sector.
    • $IRDA$ Act - $1999$ permits$ 26\%$ ( Direct foreign Investment $FDI$ ) in private insurance companies.
    • In the year $2015, 49 \%$ $FDI$ private insurance companies is possible.
  • Objective Of $IRDA$ : It can be noted as under :
    • To give options of selection of different types of insurance polies to insure.
    • To give more service to insure through less premium by healthy companies between insurance companies.
    • For the growth of economy through insurance sector. creating more monetary fund.
    • Frame the organization to solve the companies regarding insurance .
    • Frame the rules and regulations, for bringing self – control in insurance sector and to develop insurance sector and to give benefit to insurance holders of various policies at low premium.
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Question 35 Marks
State of types of General insurance and explain any two in detail.
Answer
  • Introduction :
    • Many types of risks are associated with assets and property.
    • Damage to property and agriculture is caused by fire, accident, cyclone, tempests , earthquake ,tsunami and many other calamites.
    • General insurance is a common concept to get compensation against economic loss.
  • Meaning of General Insurance :
    • The asset of which physical value is assessed band compensation due to specific causes of loss is paid by insurance company within specific calculations is called general Insurance contract.
  • Types of General Insurance : there are three types of General Insurance.
$(A)$ Goods Transportation Insurance $(B)$ Marine Insurance $(C)$ Aviation Insurance.
    • Goods Transportation Insurance :
      • Partial or total risk of damage to goods may occur while taking goods from one place to another, Against this risk three types of insurance is available to get economic protection against risk, they are
      • $(1)$ Marine insurance $(2)$ Aviation insurance $(3)$ Road or railway Insurance .
        • Marine insurance :
          • Marine insurance was initiated in the $18^{\text {th}}$ century by Loads of London institution .
          • Since then till this date most of the international trade is carried out through marine route,. On marine route the risk of robbery through sea robbers, tempests and tsunami are faced .
          • Against damage done, to get economic protection the insurance of ship and good ids taken .
        • Aviation Insurance :
          • Aviation insurance was started in the route, the beginning of the $18^{\text {th}}$ century.
          • Valuable and light weight parcels are carried very fast through air route , The rates of air premium are higher than those of marine premium.
        • Road or Rail Insurance :
          • Transportation pf goods is carried out through road railway route During transportation through these two routes, is economic risk caused by theft, robbery and accident, Insurance is taken of to get economic compensation against loss occurred.
        • Fire insurance :
          • The insurance taken of specific property or goods and it is totally or partially damaged or completed destroyed by fire and against premium insurance company has promised to pay compensation is called contract by fire insurance.
        • Other General Insurance :
          • Various types of insurance policies exist to satisfy needs of people in society .
          • It is included in other general insurance e.g. Insurance of hand, foot and fingers of cricketers, insurance of a throat of a singer, thirty party damage or loss in accident of agriculture , higher education insurance for students fraud committed by employee and loss occur due to it, insurance etc.
  • Conclusion :
    • Initially marine, fire and life insurance concept was the excised Butt due to cariouos current and future financial needs, today various type of insurance products exist.
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Question 45 Marks
State and explain the type of Life Insurance.
Answer
  • Introduction :
  • One who is born in sure to die.
  • It is mush uncertain when will death approach.
  • Income ceases on the death of an individual .
  • Their dependents become helpless.
  • Keeping this fact in mind even after their heirs get financial supports, with this intention individual takes life insurance.
  • Meaning of life Insurance :
  • Insurance company promises to pay the fixed amount of insurance to the4 heirs deceased who has taken insurance such contract is called the insurance of life, the inure has to pay the fixed premium to the Life Insurance.
  • Types of Life Insurance : There are two types of Life Insurance .
  • $(1)$ Whole Life Insurance $(2)$ Endowment Insurance
  • Whole Life Insurance :
  • Insurance company promise to pay the fixed amount to the heirs of the deceased who has taken insurance and such contract is called insurance of whole life.
  • For this , insured has to pay the fixed premium to the insurance company . This premium is paid at a fixed interval to Life Insurance Company.
  • Individual’s life is valuable . It I priceless. Individual considers his ability to pay premium and then takes insurance of the amount within his capacity par premium.
  • As per life insurance contract, if natural death occurs and if there is no reason to suspect death, then insurance company pays full amount to the heir of the principle of indemnity is not applicable to Life Insurance.
  • Endowment Insurance :
  • The contract in which insurance company promises to pay he amount on maturity to the insure or to their’s heir in case of death before maturity of policy is called endowment insurance.
  • Under this type of contract insure has to pay fixed amount as a premium at fixed time interval to insurance company, Insurance company is not bound to pay the amount of insurance if the death of an insured is suspected by the insurance company.
  • Conclusion :
  • In the current time out of two types of life insurance policies, endowment policy has become more popular.
  • Under both types of insurance contract if the insurance’s death is suspected Then the company is not bound to pay the amount of insurance.
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Question 55 Marks
How does insurance contract differ from general contract?
Answer
An insurance contract is the contract of utmost good faith where as a general contract is the agreement between two parties and enforceable by law.
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Question 65 Marks
Explain the difference between Bonded warehouse and warehouse for custom duty paid goods.
Answer
No. Points Bonded Warehouse Warehouse for custom duty paid goods
$1.$ Objectives When importer is not in a position to pay custom duty or imported goods is going to reexport, then goods is stored in this type of warehouse . After paying the custom duty on imported goods, if it is not going to transported urgently then it is stored in this type of warehouse.
$2.$ Payments of custom duty Imported goods can be stored without payment of custom duty. Imported goods can be stored after paying the custom duty.
$3.$ Possession Before taking possession of the stored goods custom duty has to be paid. While taking the possession of the goods custom duty is not to be paid.
$4.$ Ownership of warehouse Either government or the port authority is the owner of this type of warehouse. The ownership of this type of warehouse is port officer.
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Question 75 Marks
Explain the difference between private warehouse and public warehouse.
Answer
No. Points Private Warehouse Public Warehouse
$1.$ Meaning To store the material. When product or trader keep the warehouse of their own is called private or personal warehouse. To store the material, when any person can hire the warehouse , is called public warehouse.
$2.$ Rent This type of warehouse is not given on hire to any person. This type of warehouse is given on hire at specific rent to any person.
$3.$ Facilities In private warehouse owner creates facilities according to the requirement of his goods. In public warehouse not specific, but general facilities are given .
$4.$ Goods of Third part y Goods of third party is not stored in this type of warehouse. Goods of any person of firm is stored in public warehouse .
$5.$ Rules and regulations In private warehouse there is no specific rules and regulation for the storage oh goods. as it private. In public warehouse the rules and regulation decided by the government has to follow.
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Question 85 Marks
Explain in brief various service of post Department
Answer
  • Introduction :
    • For last $150$ years post department providing the services of communication.
    • Various services of post department has played vital role in department of trade and commerce.
    • Pressure of work of post department is reduced due to modern technology and invention of mobile phone and interest. Communication through post is reduced.
    • The importance of post department is still maintained because other than this , it provides may services.
  • Various Services of post Department : They are noted as below :
    • Ordinary post
    • Registered post
    • Parcel Service
    • Speed post parcel
    • Express parcel
    • Savings Services
    • Recurring Deposit Scheme
    • Time Deposit Scheme
    • National Saving Certificates
    • Kisan vikas patraa
    • Public provident Fund
    • Postal Insurance
    • Monthly Income Scheme
    • Money Order
    • Other Ancillaries Services
      • Orsinary post :
        • Communications is carried through post card or inland letter.
      • Registered post :
        • with the signature of the person whom the post is addressed to, the acknowledgment is received as proof. It is called registered post for extra amount is paid.
      • Parcel services :
        • Sender of the parcel pays fees to the post office and seeds parcel from one place to another .It can be insured also.
        • Post department recovers the value of the content and charges from the receiver of the parcel and then after delivers the parcel.
        • It is called value payable post $(V.P.P. )$
      • Speed post / parcel :
        • In India from specific place within specific time post or parcel is delivered through post department .
        • Extra money is to be paid for r this.
      • Express parcel :
        • Services to send parcel by post department very fast is called express parcel service. For this purpose post department uses air service and other speedy media and for this money is paid. It can be insured too.
      • Savings services : :
        • Like bank savings accounts are opened in post – offices too, For this Facility of cheque book and $ATM$ card is avail.
      • Recurring Deposit Scheme :
        • The time duration of this scheme is $5$ years.
        • Depositors ahs to deposit fixed date of every month regularly .After $5$ years accounts holder gets amount with interest.
      • Time Deposit Scheme :
        • In post office for $1,2,3,$ or $5$ years $D$ $200$ or any amount in multiplication of it can be deposited for fixed period and at the end of time limit account holder receiver the amount with interest.
        • This account can be closed even before maturity .
      • National Saving Certificates :
        • $5$ or $10$ years national saving certificates of $D$ $1,000$ or in its multiplication are bought from post office and on its maturity amount with interest can be obtained from ant post office.
      • Kisan Vikas patra :
        • Bought from any post office, double amount of kisan Vikas patra after $100$ months means after $8$ years and four months can be obtained with interest from any post office by presenting them.
      • Public [provident Fund :
        • It $I$ known as $P.P.F.$ period of this account is $15$ years.
        • Every year minimum premium subscription is $D$ $500$. Amount deposited in this account is deducted from Income tax.
        • At present maximum amount $D$ $1,50,000$ can be subscribed in this account.
      • Postal Life Insurance :
        • The benefit of this scheme is avail to only government and similes and bonus and is higher than other insurance policy.
      • Money Order ?:
        • Money can be sent from one place to another through post – office.
        • It is known as money order. Post office ha started through online technology from $D$ $1,000$ to $D$ $50,000$ are sent which is called Instant Money Order $(IMO )$. Besides this $E$- Money order service is started to send $D$ $1$ up to $D$ $5,000$ This service is provided by certain fixed post office. For money order commission is paid to post office.
      • Monthly Income Scheme :
        • It is known as MIS. Account can be opened for years in single or joint nemes. Every month the insurance policy .
      • $1, 8, 13$ Other Ancillaries Services :
        • In the current time other ancillaries services are provide by post office. Services like purchase and sale of foreign currency, travellers’ cheque and debit card in foreign currency , draft in foreign currency , investment in mutual fund.
        • Payment of pension to pensioners railway booking, payment of electricity bill and functioning as government agents for various services .
  • Conclusion :
    • Service of post Department are of great importance because post Department not only provide service of communication but also provides services to be helpful to government and non – government employees and trade and commerce.
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Question 95 Marks
Difference between Fire Insurance and Life Insurance
Answer
Points of Difference Fire Insurance Life Insurance
$1.$ Objective To obtain protection against loss due to fire, fire insurance is taken. To obtain protection against risk of Life along with the intention of financial savings , Life insurance is taken.
$2.$ Certainty of Risk It is certain that when fire will occur and how damage will be. Man’s death is sure but its time is not certain.
$3.$ Duration of Insurance Fire insurance is taken for one year period. Life insurance can be taken for long period.
$4.$ principle of Indemnity In Life insurance policy the o=principle of indemnity is strictly followed. In Life insurance principle of indemnity is not considered. Compensation is predefined.
$5.$ Insurable Interest At the time of taking fire insurance and when it matures, it is necessary to have insurable interest of insure. While taking life insurance insurable interest is necessary but when it matures insurable interest is not required.
$6.$ Certainty of Compensation The compensation is not fixed. It depends on the loss occurred by fire. In Life Insurance amount is fixed while it is taken. It is certain.
$7.$ principle of Subrogation In fire insurance principle of subrogation is applicable. In Life Insurance principle of subrogation is not applicable.
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Question 105 Marks
Explain the difference Railway and water transportation.
Answer
No. points of Difference Railways transportation Water ways Transportation
$1.$ Capital Investment Fixed capital investment is made of railway transportation. Investment such as purchase of land to make railway tracks, to prepare platform, or purchase railway engines and wagons etc. For Water ways route transportation hugh investment is made to purchase steamer. Compare to railway this investment is less.
$2.$ Specific route For railway specific way is prepared. For water ways route no fixed way is prepared in water.
$3$ Speed Railway is transportation is speedy. Speed is quite less in marine transportation.
$4$ Risk Railway level is low in railway . Ice berg, sea – robbers , tempests etc. ate the risks of water way transportation.
$5$ Fare Railway fare is lower than that of steamer. Railway of fare is higher in water way transportation.
$6.$ Competition Ownership of railway is of Indian government . there is no private ownership, No question of competition arises. Due to private shipping companies we observe competition on water ways transportation.
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Question 115 Marks
Explain the difference between Water – Ways And Airways .
Answer
No. Points of Difference Water – Ways Airways
$1.$ Geographical Condition Water ways is used where there I river, ocean, lake, canals etc. It is used in Lilly areas and valley areas.
$2.$ Speed When there is not mush importance of time then marine route I used,. Air route is used when time factor is of great importance.
$3.$ Regulations Government regulations on water way are comparatively less. Government regulations on air route are more.
$4.$ Expanse Compare to air route expense of transportation is less. Compare to marine route expenses of transportation is high.
$5.$ Competition As water way boat, ship and steamer are used. As there is government restrictions on less competition.
$6.$ Vehicles   Air route , helicopter , aeroplane are used.
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Question 125 Marks
Explain the difference between road ways and Railway .
Answer
No. Points of Difference Road Ways Railway
$1.$ Vehicles Animal carts, bus, truck, rickshaw etc, are used in road transportation. Only railway used on railway route
$2.$ Changing Capacity Road route is changeable. It can be changed as per the need of the sender of goods. Railway route is non – changeable . No change can be done.
$3.$ Variety in the selection of Vehicle Out of many vehicles on road ant one can be selected On railway route there is no scope of selection.
$4.$ Competition Customers ar beneficial because on t road route, there is much competition . On railway there is monopoly of government , customers do not get any benefit of it.
$5.$ Distance It is used to send goods to short distance . It is used to send goods to long distance.
$6.$ Types of item Road route is used if the item is small in size and light weight . Railway route is used if the thing is big in size and heavy weight.
$7.$ Expense Constructing and maintaining road route is less expensive. Preparing railway route and its maintains is more expensive.
$8.$ Government Restrictions Less restriction of government on road roate. On railway route government restriction
Are more.
$9.$ Capacity of transportation On road route at a time too mush load can not be carried . Too mish load can be carried at a time on railway.
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Question 135 Marks
State the meaning of transportation and give brief information about its types
Answer
  • Introduction :
    • Due to diversity of nature , various products are produced in every region.
    • Transport service is important for transportation of such products to satisfy human needs by utilization of these products, In the ancient days products were transported with the help of camel , bullock , horse, donkey and elephant , with the invention of various facilities today products are transported through land, air and , marine route.
  • Meaning of Transportation :
    • Transportation is such service through which goods and people are shifted from one place to another and air marine route is used for this purpose.
  • Types of Transportation :
      • Animals Operated :
        • In the ancient days goods and people were carried through camel, bullock, donkey, elephants horses etc. Even today in many village of India , goods are carried through camel – charts and bullock – carts
      • Human operated :
        • In the cities like Kolkata, even today human having is used to carry passengers . These pedal rickshaws are run by human force.
        • Hand carts ate used to carry goods, This is an old system of carrying goods, Through this cart good are reached two routes.
      • Land : this transportation includes the following two routes.
        • A. Railway Route :
          • India has the longest railway line to transport people and goods . Diesel and electricity is used in railway engine.
          • Today $CNG$ means compressed natural gas is used.
          • Besides this, cable, magnet , force , and law of gravity is used, Besides engine in many carriage such forces are used.
          • Such trains are called multiple unit trains.
          • Big Cities of India are connected with each other due to railway line.
          • As a result. Trade and commerce has become smooth.
        • B. Road :
          • One can go form one region to another by road ,. Transportation is easy through road route because direction , speed, time and place can be changed and service can be provided up to door step, Road route is used though private and public vehicle.
          • Less weight goods through truck is carried on road route for transportation. In India form Kashmir to Kanyakumari throuogh truck, goods are transported to various region .
          • Besides this $BRTS$ (Bus Rapid Transit System ) is used for people in Ahmedabad , surat, and Rajkot. For this bus is separate so it reaches to the fixed point very fast.
          • The use of vehicles is increasing in metro cities and it caused the problems of pollution of air and sound and created traffic and parking problems.
        • Transportation through waterways :
          • This is the oldest system of transportation . lake, sea. River, canal etc. are used for transportation through waterways ,Boat . ship , Steamer etc. ar5e used. Over craft with fan is used where there is water on flat land and ferry service is offered through it . this route is useful to enter from one country to another country .
          • Today high steamer has the capacity to carry more than $1000$ people at a time.
          • Due to engine with modern technology goods in bulk is transported easily.
          • On marine route tempests and t tidal waves a are the challenges , So compare to other route waterway is slow, transportation is not as fast as it is through other routes.
          • Waterways roate is developed through canals and dame where water is stored.
          • Huge dams are constructed for this route .
      • Airway Transportation Route :
          • this is no option to air transportation route for long distance rapid transportation of people and goods.
          • In the dense areas where run way for aeroplane is not possible , helicopter service is proved more useful. Insurance can be taken for air transportation .
      • Transportation through pipeline :
          • Liquid substance like petrol, diesel crude oil, water petroleum products are transported through pipeline . in Bihar , Gujarat , Asam and Haryana states crude oil and petroleum are transported through pipeline .
          • Pipeline facility is there in Gujarat from hajira to Madhya Pradesh uttar Pradesh $(U.P)$ for transportation of gas.
  • Conclusion :
    • Trade and commerce is not possible in the absence of transportation .
    • For purchase and sales of goods among various regions , services of transportation are inevitable.
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Question 145 Marks
Explain in brief the basic principles of insurance Contract
Answer
  • Introduction :
  • When two competent parties give the free consent as written promise to performs or not to perform any assignment against financial consideration is called contract. From this view point insurance too is a contract. Indian contract Act is applicable to every contract. Insurance contract is a special type of contract. It is required for both the parties to obey the basic principles of insurance contract. Insurance contract due to breach of this principle.
  • Basic principles of insurance Contract : they are as under :
  • $(1)$ principles of utmost Good faith $(2)$ principle of Indemnity $(3)$ principle of Insurable interest $(4)$ principle of subrogation
  • Principle of Utmost Good faith :
  • Basic concept of insurance is social.
  • Both the parties of in surance contract should trust each other.
  • Principle of Utmost Good faith means at the time of contract both the parties should mutually give full and complete details regarding everything related to the contract.
  • Even if some detail is ot asked for and is affect the contract one should disclose it to the other party during signing the contract.
  • When the hidden detail are disclosed later on then it is a found no detail should be kept hidden detail is called breach of the principle of Utmost Good Faith and insurance contract gets cancelled.
  • In these circumstances of economic does not get back the amount of premium paid and can not receive the compensation of economic loss.
  • Principle of Indemnity :
  • The basic objective of insurance contract is to pay compensation to the insured against loss.
  • How much compensation to be paid is determined by this principle , Insurance bears properties is not take to make profit.
  • Compensation is not paid more than loss.
  • In the insurance of an individual or a thing is taken of les than it actual amount , then he/she bears proportions loss.
  • Its calculations is as below.
  • If the insurance taken of the asset is of $D 6$ lakh and the worth of asset is $D 10$ lacs and entire asset is destroyed then insure gets $D 6$ lacs as compensation .
  • If the value of asset is $D 10$ lacs , insurance taken is of $ DD 6$ lacs and damage to the asset is $D 4$ lacs then proportionate amount compensation of insurance amount $D 2,40,000$ will be paid.
  • If the value of property is $D 10$ lacs and insurance taken is of $D 10$ lacs and damage to the property is $D 10$ lacs then entire amount $D 10$ lacs will be paid by insurance company .
  • principle of Indemnity :
        • the basic objective of insurance contract is to pay compensation to the insured against loss.
        • How much compensation to be paid is determined by this principle , Insurance bears properties is not take to make profit. Compensation is not paid more than loss.
        • If the insurance taken of the asset is of $D 6$ lakh and the worth of asset is $D 10$ lacs and entire asset is destroyed then insure gets $D 6$ lacs as compensation .
        • If the value of asset is $D 10$ lacs , insurance taken is of $DD 6$ lacs and damage to the asset is $D 4$ lacs then proportionate amount compensation of insurance amount $D 2,40,000$ will be paid.
        • If the value of property is $D 10$ lacs and insurance taken is of $D 10$ lacs and damage to the property is $D 10$ lacs then entire amount $D 10$ lacs will be paid by insurance company .
  • Principle of Insurance Interest :
        • The insure takes insurance of certain asset and he/ she is economically beneficiary by its existence and suffer economic loss from its destruction.
        • Regarding this thing the interest of insure is insurable interest e.g. when the house of neighbor is damaged, we really feel sorry but do not bear any economic loss.
        • Our insurance does not exist in property and insurance is taken then it gets cancelled.
  • Principle of Subrogation :
        • Under this principle when insurance company has paid compensation to the insure.
        • For the thing damaged and of which insurance is taken.
        • Then after the ownership of that thing belong to the insurance company, insurance company can sell that damaged thing and obtain money e.g. when a vehicle is damaged and insurance company pays compensation for the damaged part, then after ownership of these replaced parts is of the insurance company. Insurance company sells it.
        • In scrap market and gets money , This principle is not applied to life Insurance . When a peron dies, insurance company pays the amount of insurance to the heirs of the deceased but the dead body is given to its heirs for funeral and final ceremony, It does not belong o insurance company.
  • Conclusion :
    • Insurance Should be taken to keep in mind that the principles of insurance capacity to pay premium also should be taken care of.
    • If regular premium is not paid then insurance company may cease its responsibility.
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Question 155 Marks
“Insurance contract is a special type of contract” - Explain.
Answer
  • Introduction :
  • Natural and man – made risks are association witg hu,am life and trade and commerce.
  • Whatever care we take, fire, earthquake, cyclone, heavy rainfall flood etc. risks can not be avoided.
  • It causes the risk of life and large scale economic loss. Insurance contract differs from general contract.
  • `What is general (legal ) contract ? :
  • When two parties in exchange of financial consideration to perform or not to perform any assignment freely give written promise or guarantee is called a legal contract.
  • What is Insurance contract ?
  • “Insurance is a written contact between two parties, among which the party who takes insurance and give certain amount of money as premium to another party (Insurance company ) and against it, insurance company gives a promise to reply the losses incurred during a specific stipulated time.
  • This written document of Insurance Contract is called ‘ Insurance policy’
  • As per above definition insurance contract is a legal contact like other contract. .
  • How is insurance contract a special contract ? :
  • There are all characteristics of legal contract in insurance contract. Such as
  • $(1)$ two parties $(2)$ premium $(3)$ promise $(4)$ written contract. $(5) $Fees consent. Besides this both the parties under insurance contract have to observe the following principles.
  • So insurance contract is called a special contract.
  • $(1)$ principle of utmost good faith. $(2)$ principle of indemnity. $(3)$ principle of insurance interest. $(4)$ principle of subrogation.
  • Above mentioned principles of contract do not apply to other general contracts. Moe over in insurance contract subject to terms and conditions, the amount of insurance and time limit can be changed and insurance contract can be renewed .
  • That is why it is a special type of contract.
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Question 165 Marks
Difference between General Insurance and Life Insurance
Answer
Points General Insurance Life Insurance
$1.$ Period of duration Period of duration of general insurance is one year. The period of duration of life insurance is more than one year.
$2.$ Certainty of Risk In general insurance risk is uncertain. In life insurance, normally the risk is certain.
$3.$ principle of Insurance In general insurance all the four principles of insurance are applicable . In life insurance principle of indemnity and principle of subrogation are not applicable.
$4.$ Saving . In general insurance protection against risk is obtained. If no accident occur during fixed period then premium paid is not returned. In Life insurance protection is obtained against risk. Along with it if the policy holder does not die within fixed period, the amount of paid is returned to the insurance. Thus it is a sort of compulsory saving.
$5.$ Insurable Interest In general insurance insurable interest should exist while taking insurance and paying compensation for loss both the times. In Life insurance insurable interest is considered only when insurance is taken.
$6.$ premium In general insurance premium increase as he risk increase. In Life Insurance the amount of premium does no vary even if the risk increase.
$7.$ Number of policy One and Only one policy of the same type can be held for the same thing. More than one insurance policy of Life of one person can be taken, the maturity amount is paid to the policy holder or to his/ her legal heir in case of death.
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