Valuation study for need of Insurance

1. Need & Identification of Insurance ….
:SUMIT KULSHRESTHA
LECTURER
DEPARTMENT OF MANAGEMENT
BIT-MESRA
EXT: JAIPUR CAMPUS.

2. DEFINE INSURANCE
Insurance is related to the protection of the economic values of assets.
The asset is valuable to the owner, because he expects to get some
benefits from it. The benefit may be an income or in some other form.
E.g.:-cow is asset for a farmer.
Insurance is a mechanism that helps to reduce the effects of such
adverse situations & conditions. It promises to pay to the owner or
beneficiary of the asset, a certain sum if the loss occurs.

3. HOW INSURANCE WORKS
Insurance work on simple mechanism.
People who are exposed to the similar/same risk come together &
agree that, if any one of them suffers a loss, the others will share the
loss & make good to the person who lost.
Insurance is work on risk transfer & risk sharing principle, which
believe to make an unbearable loss, bearable.

4. TYPES OF INSURANCE
INSURANCE
LIFE INSURNACE NON LIFE INSURANCE
MICROINSURANCE
FIRE INSURANCE MISCELLANEOUS
LIABILITY
MARINE INSURANCE (i) PROFESSIONAL (i) HEALTH
(ii) MOTOR-VECHILE (ii) PERSONAL ACCIDENT
(I) WORKMEN’S COMPENSATION
(ii)TRAVEL (iii)FIDELITY (iv)CREDIT

5. LIFE INSURANCE
Life Insurance is a financial tool & instrument that provide protection
to the insured person from the financial loss happen to him due to
any risk & contingencies.
A Life Insurance promises that the insurer will pay to the policyholder
a certain sum of money if the person insured dies or any other
specified contingency happens.
(i) Insurance is a contract between the insurer & the assured.
ii) The contract is based on the loss due to happening or not happening
a future incident.
(iii) A consideration in the form of payment of an amount by the insured
person.

6. LIFE INSURANCE
(iv) The insurer promises to make good the loss in so far money can do
it, in case the loss occurs on the happening of the contingency.

7. NEED OF LIFE INSURANCE
To understand the value of human life, In insurance field a term is
used. i.e.
HLV:- HUMAN LIFE VALUE.
Normally, A question arises in mind that; How a person know the value
of himself ?
E.g.:-let there is Mr. X having age 30 ,He is earning 5 lac yearly.
To calculate HLV, we can use some facts & assumptions.
In India from the demographic report it is found that average age of
person is 70 years.

8. NEED OF LIFE INSURANCE
From this figure it is found that, if all the conditions remain favorable
Mr. X earn & give Rs 2 crores to his home.
But if any contingencies happen to him after 10 year from now like
death, permanent disability, critical illness that affect the financial
productivity of him or reduces to nil.
There is loss of Rs 1.5 crores in his or family earning.
To cover from this financial loss to his family .
There needs a life Insurance.