Updated date:

Oct 1, 2009

Difference between life, fire & Marine Insurance

Author:: nilum

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Life assurance differs from the fire and marine insurance in the following respects:

Distinction point between, Life assurance, Fire Insurance & Marine Insurance respectively !!!

1. Nature of

contract

It is an ordinary contract whether it is simple or pure but the principle of indemnity does not apply in its contract.

It is a contract of indemnity.

2. Nature of

event

The event (death) that is considered in life assurance is a certain event which is bound to take place sooner or later.

The event (fire) that belongs to this contract is uncertain which may or may not take place.

The event (sea perils) that belongs to this policy is uncertain which may or may not take place or which may happen partially.

3. Claim limit

The whole of the assured sum becomes payable on the maturity of the policy.

Under fire insurance contract only the actual market value of the property or gods destroyed by fire can be claimed from the insurance company. In other words there is not any profit motive.

Under marine insurance contract, not only is the cost of goods destroyed the sea perils but also 10% to 15% margin of anticipated profit plus shipping charges payable by the insurer.

4. Duration

Life policy covers a larger duration and cannot be canceled by the insurance company.

The duration range of such type of insurance is from 10 days to 12 months. However it can be renewed after the expiry of period.

Some types are issued for particular voyage but other policies cover a period of twelve months maximum.

5. Determination

of premium

The determination of premium rate is simple. Same rate of premium may be charged for all the persons falling in the same age group.

In fire insurance risk are extremely varying, therefore the premium rates also vary violently.

In marine insurance risks are extremely varying, therefore, the premium rates also vary violently.

6. Surrender

value

It has surrender value after three years of its existence.

It does not have is surrender value.

It does not have its surrender value.

7. Importance

It possesses not only the element of protection but also the element of investment.

It involves the element of protection only.

8. Insurable

Interest

Insurable interest must exist when the policy is taken but need not at the time of the loss.

Insurable interest must present both at the time of the policy taken and at the time of loss.

Insurable interest must exist at the time of the loss but need not present when the policy is taken.

9. Assignment of

policy

It can be assigned to another person after serving notice to the insurance company.

As it is personal contract between the insurance company and assured so he assign his policy without the prior consent of the insurer.

As the goods may change several hands during the voyage so policy may be transferred along with the transfer of the ownership in goods. It is not essential to serve notice to the insurer at the time of assignment.

10. Title

The world “Assurance” is generally used along with life contract due to its certainty of events (death)

The word “Insurance” is generally used along with fire contract due to its uncertainty of events.

The word “Insurance” is generally used along with marine contract due to its uncertainty of events.

11. Doctrine of

subrogation

The principal of subrogation is not applicable to life assurance.

The principal of subrogation is to be applied to this type of contract.

The principal of subrogation is to be applied to marine insurance.

12. Right of

credit

As there is surety to refund the amount insured so life policy holder can obtain the loan against his policy in time of need.

Fire policy holder cannot enjoy the credit facilities against his policy due to absence of surety to refund the sum insured.

Marine policy holder cannot enjoy the credit facilities against his policy due to absence of surety to refund the sum insured.

13. Valuation

The value of the insurable interest in life assurance cannot be assessed in monetary term. So there is no maximum limit of contract and the loss arisen by the death cannot be evaluated and consequently cannot be compensated.

The value of the insurable interest may easily be explained in term of money. So there is an upper limit for contract and the loss arisen by the fire can be indemnified.

The value of insurable interest may easily be explained in term of money. So there is an upper limit for contract and the loss arisen by the sea perils can be indemnified.

Comments

couldn't understand some points on February 15, 2018:

couldn't understand some points

simon on October 28, 2015:

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vishnu on March 21, 2015:

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monika on January 25, 2015:

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arivu on November 17, 2014:

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shivam tripathi on September 22, 2014:

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Zarnaab on January 17, 2014:

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princekochar222058@yahoo.com on October 31, 2012:

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