Difference Between Different Types of Insurance Contracts

1. Forms

The insurance contract may be divided into two forms – first life insurance contract and second contract of indemnity.

2. Occurring of Event

The event, the death, in life insurance is certain, but the only uncertainty is the time when the death will occur.

In indemnity insurance (in fire and marine insurances) the event may not take place at all or may take place in part.

Therefore, in life insurance, ordinarily every place will become a claim sooner or later but it is not certain in indemnity insurance.

3. Subject-Matter

The subject-matter in life insurance is life. The chances of death would increase along with advance in age whatever precautionary measures may be taken for improvement of health whereas the property in other insurance can be repaired and replaced and may remain usually in good condition.

4. Variance of Premium

In life insurance premium is not much variable whereas in other insurance premium is variable in numerous forms.

5. Classification of Risk

The classification of risks is generally more simple in life insurance than in other types of insurance contract. In life contract it would be standard, sub-standard and uninsurable but in other insurance it may be several.

6. Period of Insurance

Generally the life insurance is taken for longer period. Whereas the other forms of insurance are taken for not more than one to two years.

7. Protection and Investment

The life insurance contract provides protection loss early death and investment to meet the old age requirements. Other form of insurance do not provide investment because the premium paid is not returnable if the contingencies (hazards) do not occur within the period.

Other forms of insurance provide only protection against loss on damage of the property against the insured perils.

8. Premium Payment

The mode of premium payment in life insurance is generally level premium whereas in other forms of insurances, it is single premium.

9. Insurable Interest

Insurable interest must be at the time of proposal in insurance but in property insurance it must be present at the time of loss.