Insurance may be defined as a contract whereby one party agrees to indemnify the other party against a loss which may arise or to pay a certain sum of money (premium) on the happening of a certain event in return of compensation.

Types of Insurance

The two basic types of insurance are:

Life assurance v life insurance

The slight difference in the naming of life insurance and life assurance may suggest that it’s simply a matter of preference in wording. Although many people use the two terms interchangeably to mean the same thing, there is one small but key difference between life insurance and life assurance.

Essentially, life insurance aims to protect your family from a loss of income if you were to die unexpectedly. It’s designed to protect their lifestyle and financial well-being. This usually relates to term life insurance plans – an insurance policy that runs for a pre-agreed term and only pays out if you die within that period – but as mentioned previously, some providers will use life insurance to mean the same thing as life assurance, so check exactly what they mean.
In reality, life insurance should really only be related to an insurance policy set against a fixed period of time. Life assurance, on the other hand, is not exactly the same. Death is assured in any life, so the policy is designed to provide your family or next of kin with a lump sum to help meet their financial needs after you die, and this policy is guaranteed for life, for as long as you live (and continue to pay the premiums).

Double Insurance:

When the same subject-matter is insured with two or more insurers and the total sum insured exceeds the value of the subject-matter, the assured is said to be over-insured by double insurance. As stated in Section 34 of the Marine Insurance Act, 1963, over-insurance and double insurance are valid unless the policy otherwise provides.

For instance, if Mr. X insures his factory worth BDT.2 lakh with three insurers as—with A for BDT.90,000, with B for BDT. 80,000 and with C for BDT.70,000 there is a double insurance because the aggregate of all the policies exceeds the total value of Mr. X’s factory. If Mr. X insurers with A for BDT.80,000, with B for BDT. 70,000 and with C for BDT. 50,000 there is no double insurance.

A man may insure with as many insurers as he pleases. In case of loss, he may claim payment from the insurers in such order as he may think fit, but he will not get more than his actual loss, because a contract of insurance is a contract of indemnity. The insurers as between themselves are liable to contribute to the loss in proportion to the amount for which each one is liable.

If an insurer pays more than this proportion of the loss, he is entitled to recover the excess from his co- insurers.