This document provides an overview of life insurance and general insurance principles and practices. It begins by asking questions about why people work, what they do with earnings, why saving is necessary, types of savings, minimizing losses in business and life, and fulfilling losses. It then defines insurance, discusses the history and nationalization of life and general insurance in India. It outlines the key regulatory bodies and companies involved. It also covers the advantages of insurance for businesses, individuals, and society and defines key terms used in life insurance.

1. PRINCIPLES & PRACTICE
OF LIFE INSURANCE AND
GENERAL INSURANCE
BBA VI SEM,
VSK UNIVERSITY,
BELLARY

2. QUESTIONNAIRE:
• Why do people work?
• What they do of their earning?
• Why saving in necessary?
• What are the kinds or sources of saving?
• Can we stop the loss or damages in business and life?
• How to fulfil the loss / damage in business or life?
Income – expenses =
saving
Income – saving =
expenses
10 x 100 = 1000
2 x 150 =300
700 / 3 = interest
2 x 150

3. Definition
Insurance may thus be considered as a process by which the losses of a few, who are
unfortunate to suffer such losses, are shared amongst those exposed to similar uncertain events
/ situations.
The Insurance Act 1938 was the first legislation enacted to regulate the conduct of insurance
companies in India. This Act, as amended from time to time continues to be in force. The
Controller of Insurance was appointed by the Government under the provisions of the
Insurance Act.

4.  Life insurance business was nationalised on 1st September 1956 and the Life Insurance
Corporation of India (LIC) was formed. There were 170 companies and 75 provident fund
societies doing life insurance business in India at that time. From 1956 to 1999, the LIC held
exclusive rights to do life insurance business in India.
 With the enactment of General Insurance Business Nationalisation Act (GIBNA) in 1972,
the non-life insurance business was also nationalised and the General Insurance Corporation
of India (GIC) and its four subsidiaries were set up. At that point of time, 106 insurers in
India doing non-life insurance business were amalgamated with the formation of four
subsidiaries of the GIC of India.
National Insurance Company Limited. The New India Assurance Company Limited.
The Oriental Insurance Company Limited. United India Insurance Company Limited.

5. In 1997 the Insurance Regulatory Authority (IRA) was established. The
passing of the Insurance Regulatory & Development Act, 1999(IRDAI) led
to the formation of Insurance Regulatory and Development Authority of
India (IRDAI) in April 2000 as a statutory regulatory body both for life,
non-life and health insurance industry. IRDA has been subsequently
renamed as IRDAI in 2014.
 There are 24 life insurance companies operating in India as detailed
hereunder: a) Life Insurance Corporation (LIC) of India is a public sector
company b) There are 23 life insurance companies in the private sector.

6. Advantages of Insurance to
Business
1. Means of Economic Security
2. Insurance increase business
efficiency
3. It enhance credit
4. Business Continuation
5. Welfare of Employee
6. Helps in establishing
International Trade
Advantages of Insurance to
Individual
1. Insurance provide Security and
safety
2. Insurance eliminate dependency
3. Insurance protects mortgaged
property
4. Life Insurance promote saving
5. Exemption from Tax. (sec 80D)
6. Insurance provide profitable
investments
Advantages of Insurance to the
society
1. Source of Employment
2. Wealth of the society is
protected
3. Reduction in inflation
4. Economic growth of the
country
5. Capital Formation

7. Life Insurance can be defined as a contract between an insurance policy holder
and an insurance company, where the insurer promises to pay a sum of money in
exchange for a premium, upon the death of an insured person or after a set period.
Terms used in Life Insurance:
 Life Assured
 Proposer
 Nominee or Beneficiary
 Insurer
 Life Cover
 Maturity Benefit
 Premium
 Premium Payment Term
 Policy Term

8.  Life Assured: It is the person who is covered under the insurance policy
 Proposer: It is the person who pays the premiums of the policy.
For example: If you have bought the policy for yourself, then you are both the
Life Assured as well as the Proposer. Similarly, if you purchase
an insurance policy for a family member, then you are the proposer and the
family member is the Life Assured.
 Nominee or Beneficiary: It is the person you appoint at the time of buying the
policy to receive the benefits of your insurance policy, in your absence.

9.  Insurer: The insurance company that sells the life insurance policy is called
the Insurer (for example, LIC OF INDIA).
 Life Cover: It is the amount that the Insurer will pay to your Nominee in
case of an unfortunate event.
 Maturity Benefit: For Protection + Savings policies, the Insurer pays a
certain lump sum of money on completion of the policy term. This amount
is known as the Maturity Amount.

10.  Premium: A premium is the amount you pay to the insurer for receiving the
benefits of the insurance policy. These payments can be made on a regular
basis throughout the policy duration, for a limited number of years or just
once, as per the options available under the policy you choose.
 Premium Payment Term: The number of years for which you pay the
premiums is known as the Premium Payment Term.
 Policy Term: The number of years for which the Life Cover continues.

11. SEVEN PRINCIPLES OF INSURANCE:
 Principle of Utmost Good Faith,
 Principle of Insurable Interest,
 Principle of Indemnity,
 Principle of Contribution,
 Principle of Subrogation,
 Principle of Loss Minimization, and
 Principle of Causa Proxima (Nearest Cause). UTMOST GOOD FAITH