Various types of insurance exist by virtue of practice of insurance companies and the influence of legal enactments controlling the insurance business. Broadly speaking, insurance may be classified as follows:
1.Life insurance : Life insurance may be defined as a contract in which the insurer in consideration of a certain premium, either in a lump-sum or by other periodical payments, agrees to pay to the assured, or to the person for whose benefit the policy is taken, the assured sum of money on the happening of a specified event contingent on the human life or at the expiry of a certain period.
The risk may be of an event which is certain that is death. The other risk may be living too long in which an individual may become too old to earn, i.e. retirement. In this case also, the earnings will decline or end. Under such circumstances, individuals seek protection against these risks and life insurance companies offer protection against such risks.
2.Fire insurance : Fire insurance is a contract whereby the insurer, in consideration of the premium paid, undertakes to make good any loss or damage caused by fire during a specified period up to the amount specified in the policy. Usually, the fire insurance policy is for a period of one year after which it is to be renewed from time to time. The premium may be paid either in lump-sum or instalments.
The risk covered by a fire insurance contract is the loss resulting from fire or some other cause and which is the proximate cause of the loss. If overheating without ignition causes damage, it will not be regarded as a fire insurance and the loss will not be recoverable from the insurer.
3.Marine insurance : A marine insurance contract is an agreement whereby the insurer undertakes to indemnify the insured in the manner and to the extent thereby agreed against marine losses. Marine insurance provides protection against loss by marine perils or perils of the sea.