Life Insurance and Fire Insurance
Solution:
Life Insurance | Fire Insurance |
1. Meaning: A contract whereby the insurance company undertakes to pay a certain sum of money either on death or maturity (whichever is earlier) for a consideration (premium) | A contract in which the insurer promises to pay compensation to the insured if something happens to the subject matter due to fire or related events. |
2. Policy took by: It can be taken by an individual for his own life or for his family members. | It can be taken by an individual for their properties or by the businessman. For their goods, properties business liabilities. |
3. Subject matter: In life insurance, the life of the insured is a subject matter | In Fire insurance, the goods and assets or property of the insured is the subject matter. |
4. Insurable interest: It must exist at the time of contract | It must exist both at the time of contract and also at the time of loss. |
5. Tenure: The policy can be issued for any number of years, even until the death of the assured. | It is generally for a short period like one year. |
6. Compensation: It is paid either on death or maturity whichever is earlier. | It is paid only if there is a loss due to fire during the term of the policy |
7. Principle of Indemnity: It is not applicable as human life cannot be valued in terms of money for calculating the actual loss. | It is applicable as the insurance company compensates for the financial loss and the insured is brought back to the same financial condition that he was before the event. |
8. Number of policies: Insured can take any number of policies on the same life. Compensation is paid on all the policies. | Generally, only one policy can be taken but double insurance is possible. However, compensation does not exceed the actual loss. |
9. Beneficiary: The beneficiary can be insured (if he survives the selected term) or else the nomine or the legal heir on the death of the assured. | The beneficiary is the insured who has insured the property or goods |
10. Surrender of policy: The policy can be surrendered before the expiry of the term subject to certain conditions. | It cannot be surrendered. |
