The insurance can be divided from two angles: first, from the business point of view and the second, from the risk point of view.
Business Point of View
The insurance can be classified into three categories from business point of view :
(i) Life Insurance,
(ii) General Insurance, and
(iii) Social Insurance
(i) Life Insurance
Life Insurance is different from other insurance in the sense that, here, the subject matter of insurance is life of human being.
The insurer will pay the fixed amount of insurance at the time of death or at the expiry of certain period.
At present, life insurance enjoys maximum scope because the life is the most important property of the society or an individual.
Each and every person requires the insurance. This insurance provides protection to the family at the premature death or gives adequate amount at the old age. when earning capacities are reduced.
Under personal insurance a payment is made at the accident. The insurance is not only a protection but is a sort of investment because a certain sum is returnable to the insured at the death or at the expiry of a period.
(ii) General Insurance
The general insurance includes property insurance, liability insurance and other forms of insurance.
Fire and marine insurances are strictly called property insurance. Motor, theft, fidelity and machine insurances include the extent of liability insurance to a certain extent.
The strictest form of liability insurance is fidelity insurance, whereby the insurer compensates the loss to the insured when he is under the liability of payment to the third party.
(iii) Social Insurance
The social insurance is to provide protection to the weaker section of the society who are unable to pay the premium for adequate insurance.
Pension plans, disability benefits, unemployment benefits, sickness insurance and industrial insurance are the various forms of social insurance.
With the increase of the socialistic ideas, the social insurance is an obligatory duty of the nation. The Government of a country must provide social insurance to its masses.
Risk Point of View
Insurance is divided into property liability and other form from risk point of view.
A. Property Insurance
Under the property insurance, property of a person/persons are insured against a certain specified risk.
The risk may be fire or marine perils, theft of property or goods, damage to property at accident.
(a) Marine Insurance
Marine insurance provides protection against loss of marine perils. The marine perils are collision with rock, or ship attacks by enemies, fire and capture by pirates, etc.
These perils cause damage, destruction or disappearance of the ship and cargo and non-payment of freight.
So, marine insurance insures ship (Hull), cargo and freight. Previously only certain nominal risks were insured but now the scope of marine insurance had been divided into two parts:
(i) Ocean Marine Insurance
(ii) Inland Marine Insurance
The former insures only the marine perils while the latter covers inland peril which may arise with the delivery of cargo (goods) from the godown of the insured and may extend up to the receipt of the cargo by the buyer (importer) at his godown.
(b) Fire Insurance
Fire insurance covers risk of fire. In the absence of fire insurance, the fire waste will increase not only to the individual but to the society as well.
With the help of fire insurance, the losses, arising due to fire are compensated and the society is not losing much. The individual is protected from such losses and his property or business or industry will remain approximately in the same position in which it was before the loss.
The fire insurance does not protect only losses but it provides certain consequential losses also. War risk, turmoil, riots, etc., can be insured under this insurance, too.
(c) Miscellaneous Insurance
The Property, goods, machine, furniture, automobile, valuable articles, etc., can be insured against the damage or destruction due to accident or disappearance due to theft.
There are different forms of insurances for each type of the said property whereby not only property insurance exists but liability insurance and personal injuries are also insured.
B. Liability Insurance
The general insurance also includes liability insurance whereby the insured is liable to pay the damage of property or to compensate the less of personal injury or death. This insurance is seen in the from of fidelity insurance, automobile insurance and machine insurance, etc.
C. Other Forms
Besides the property and liability insurances, there are certain other insurances which are included under general insurance.
The examples of such insurances are export-credit insurances, State employees insurance, etc., whereby the insurer guarantees to pay certain amount at the certain events. This insurance is extending rapidly these days.
1. Personal Insurance
The personal insurance includes insurance of human life which may suffer loss due to death, accident and disease.
Therefore, the personal insurance is further sub-classified into life insurance, personal accident insurance and health insurance.
2. Property Insurance
The property of an individual and of the society is insured against the loss of fire and marine perils, the crop is insured against unexpected decline in production, unexpected death of the animals engaged in business, break-down of machines and theft of the property and goods.
3. Liability Insurance
The liability insurance covers the risk of third party, compensation to employees, liability of the automobile owners and reinsurances.
4. Guarantee Insurance
The guarantee insurance covers the loss arising due to dishonesty, disappearance and disloyalty of the employers or second.
The party must be a party of the contract. His failure causes loss to the first party. For example, in export insurance, the insurer will compensate the loss at the failure of the importers to pay the amount of debt.