Samacheer Kalvi Class 11 Commerce Solutions Chapter 15 Insurance

Tamilnadu Samacheer Kalvi 11th Commerce Solutions Chapter 15 Insurance

11th Commerce Guide Insurance Text Book Back Questions and Answers

Exercise

I. Choose the Correct Answer

Question 1. The basic principle of insurance is .................................
a) Insurable Interest
b) Co-Operation
c) Subrogation
d) Proximatecausa
Answer: (a) Insurable Interest
In simple words: The main idea of insurance is that the person taking the insurance must have something to lose if the insured item is damaged or gone. This "something to lose" is called insurable interest.

🎯 Exam Tip: Remember, for any insurance contract to be valid, the policyholder must have a financial stake in what is being insured.

Question 2. .......................... is not a type of general insurance
a) Marine Insurance
b) Life Insurance
c) Fidelity Insurance
d) Fire Insurance
Answer: (b) Life Insurance
In simple words: Life insurance is about a person's life, not property or other general risks. This means it is treated differently from general insurance types like marine or fire insurance.

🎯 Exam Tip: Distinguish clearly between life insurance (covers a person's life) and general insurance (covers property, health, etc.).

Question 3. Which of the following is not a function of insurance?
a) Lending Funds
b) Risk sharing
c) Capital formation
d) Protection of life
Answer: (a) Lending Funds
In simple words: Insurance helps people share risks, create savings (capital), and protect lives. It does not act like a bank that lends money directly.

🎯 Exam Tip: Focus on the primary roles of insurance: risk management, financial security, and long-term savings, not direct financing.

Question 4. Which of the following is not applicable insurance contract?
a) Unilateral contract
b) Conditional contract
c) Indemnity contract
d) Inter-personal contract
Answer: (d) Inter-personal contract
In simple words: Insurance contracts are one-sided (unilateral), have conditions, and often promise to cover losses (indemnity). They are not "inter-personal" contracts, which suggests an agreement between two people on an individual basis without a formal insurance structure.

🎯 Exam Tip: Familiarize yourself with the core characteristics of an insurance contract to identify what does not fit.

Question 5. Which one of the following is a type of marine insurance?
a) Money back
b) Mediclaim
c) Hull insurance
d) Corgo insurance
Answer: (c) Hull insurance
In simple words: Hull insurance specifically covers the ship itself, while cargo insurance covers the goods inside. Both are parts of marine insurance. "Corgo insurance" seems to be a typo for "cargo insurance."

🎯 Exam Tip: Pay attention to specific terms used in different types of insurance, such as 'hull' referring to the ship's structure in marine insurance.

II. Very Short Answer Questions

Question 1. List five important types of policies.
Answer: Five important types of insurance policies are:
1. Life Insurance
2. General Insurance
3. Fire Insurance
4. Marine Insurance
5. Health Insurance
In simple words: Insurance covers different risks like life, property from fire, goods shipped by sea, and health problems. These five types help protect against common dangers.

🎯 Exam Tip: Be ready to list and briefly describe the main categories of insurance that people use.

Question 2. What is health insurance?
Answer: A health insurance policy is an agreement between an insurance company and a person or a group. In this agreement, the insurer agrees to provide specific health insurance if the person pays an agreed-upon amount (premium). It offers protection against unexpected health costs that might cause financial trouble. Health insurance helps cover medical expenses. This coverage protects against the financial burden of unforeseen illnesses or accidents.
In simple words: Health insurance is a plan where you pay money regularly, and the insurance company helps pay for your medical bills if you get sick or have an accident.

🎯 Exam Tip: When defining health insurance, highlight the concepts of 'contract', 'premium', 'risk coverage', and 'financial hardship' to explain its purpose.

III. Short Answer Questions

Question 1. Define Insurance.
Answer: According to John Merge, insurance is a plan where many people join together to share the risk that affects individuals. This means that a large group of people contributes money, and in return, the risk of a financial loss for any one person is transferred to be shared by all. It is a system for collective sharing of potential financial burdens.
In simple words: Insurance is a plan where many people pay a small amount to a company, so if something bad happens to one of them, the company pays for the big loss from everyone's money.

🎯 Exam Tip: Focus on keywords like 'risk transfer', 'collective sharing', and 'large number of people' when defining insurance.

Question 2. Give the meaning of crop insurance.
Answer: Crop insurance is a policy that gives financial help to farmers if their crops fail due to natural events like drought or flood. It covers all types of losses or damages that happen to crops such as rice, wheat, millets, oilseeds, and pulses during their production. This type of insurance helps farmers recover from unexpected losses, ensuring their financial stability.
In simple words: Crop insurance helps farmers get money if their crops are ruined by bad weather like floods or drought. It covers many kinds of crops from different damages.

🎯 Exam Tip: Explain that crop insurance is specifically for farmers and covers losses due to natural disasters affecting agricultural produce.

Question 3. Write a note on IRDAI.
Answer: IRDAI stands for Insurance Regulatory Development and Authority. It is an official, independent, and top organization that controls and oversees the insurance business in India. IRDAI was formed in 2000 by an Act of the Indian Parliament called the IRDAI Act, 1999. Its main office is currently in Hyderabad. This body ensures fair practices and protects the interests of policyholders across the country.
In simple words: IRDAI is like the main boss for all insurance companies in India. It makes sure they follow rules and works from its office in Hyderabad.

🎯 Exam Tip: Include the full form, nature (regulatory body), establishment year, and headquarters location for a complete answer on IRDAI.

IV. Long Answer Questions

Question 1. Explain the various types of Insurance
Answer: Insurance protects against different kinds of risks. All insurance contracts can be grouped into these main types:

Life Insurance:
Life insurance is a contract where an insurance company agrees to guarantee the life of a person (the assured). In return, the assured pays a certain amount of money called a premium, which can be paid all at once or in installments (monthly, quarterly, half-yearly, or yearly). The company promises to pay a fixed sum of money when the assured dies or after a certain period ends. It provides financial security to the family upon the unfortunate demise of the policyholder.

Non-Life Insurance:
This refers to insurance that covers properties and things, not human lives.

Fire Insurance:
Fire insurance is an agreement where the insurer, after receiving a premium, agrees to pay for any loss or damage caused by fire during a specific period, up to the amount mentioned in the policy. The person who buys the insurance must have an interest in the property or thing being insured so that they would lose money if a fire occurred. This helps businesses and homeowners recover from fire-related damages.

Marine Insurance:
Marine insurance is a contract where the insurer agrees to pay for losses that happen during sea travel (marine losses). The insured pays a premium, and the insurer (underwriter) guarantees to cover losses that come from dangers of the sea. This is crucial for international trade.

Health Insurance:
A health insurance policy is an agreement between an insurer and an individual or group. The insurer promises to provide specific health insurance for an agreed price (premium). It covers medical expenses and provides financial relief from illness or accidents. Being disabled due to illness or accident can be a problem for a family, as it not only stops income but also creates big medical bills. Health insurance acts as a safeguard against rising medical costs, offering protection against unexpected health expenses that could lead to financial hardship.

Miscellaneous Insurance:
This category includes other types of insurance, such as motor vehicle insurance, burglary insurance, crop insurance, and sports insurance. Programs like Amartya Sen Siksha Yojana and Rajeswari Mahila Kalyan Bima Yojana also fall under miscellaneous insurance. These cover specific, diverse risks not covered by the main categories.
In simple words: There are many types of insurance. Life insurance protects people's lives, while non-life insurance protects things like houses (fire insurance) or ships (marine insurance). Health insurance helps with doctor bills, and miscellaneous insurance covers other special risks like car damage or crop loss.

🎯 Exam Tip: Clearly define each type of insurance, including what it covers and its primary purpose, providing a brief example if possible.

Question 2. Explain the principles of insurance.
Answer: Here are the important principles of insurance:

1. Utmost Good Faith:
This principle states that both the insurance company and the person getting insured must be completely honest with each other. The insured person must share all information that affects the insurance, and the insurer must provide all details about the insurance contract. This ensures transparency and trust in the agreement.

2. Insurable Interest:
The insured person must have a financial stake in the subject that is being insured. This means they would suffer a financial loss if something bad happened to the insured item or person. Without this interest, there is no real need for insurance.

3. Indemnity:
Indemnity means getting security or payment for losses or damages. In insurance, the insured person is paid an amount equal to their actual loss, but not more than the loss. This rule ensures that the insured does not make a profit from the insurance. This principle mostly applies to property insurance.

4. Causa Proxima:
'Causa Proxima' means 'the closest cause'. This principle applies when a loss happens due to two or more causes. The most direct, main, and effective cause of the loss should be considered. The insurance company is not responsible for distant or indirect causes. This helps determine liability clearly.

5. Contribution:
If the same item is insured with more than one insurance company, it is called 'Double Insurance'. In such a situation, if a claim is made, all the insurance companies involved must share the payment proportionally based on the amount each company insured. This prevents the insured from getting paid multiple times for the same loss.

6. Subrogation:
Subrogation means 'stepping into someone else's shoes'. According to this principle, once the insurance claim has been paid, the ownership rights of the damaged item pass from the insured person to the insurance company. This allows the insurer to recover money from the party responsible for the loss.

7. Mitigation:
In case of an accident or loss, the insured person must take all possible steps to reduce or lessen the loss or damage to the insured item. This principle encourages policyholders to act responsibly and minimize potential harm.
In simple words: Insurance works on several key rules. Everyone must be honest (utmost good faith). You must have something to lose (insurable interest). You get paid only for your actual loss, not more (indemnity). The company looks at the main reason for the loss (causa proxima). If you have two policies, both share the payment (contribution). After paying, the company takes over your rights to the damaged item (subrogation). You must try to stop the damage from getting worse (mitigation).

🎯 Exam Tip: Memorize each principle's name and its core meaning, focusing on how each one contributes to the fairness and legal standing of an insurance contract.

Question 3. Discuss the causes of risk.
Answer: Business risks happen for many reasons, which are categorized as follows:

1. Natural Causes:
Humans have little control over natural events like floods, earthquakes, lightning, heavy rains, and famines. These events cause big losses of lives, property, and income for businesses. These are unpredictable and often unavoidable.

2. Human Causes:
Human causes include unexpected events such as employees being dishonest, careless, or negligent. Other examples are work stoppages due to power failures, strikes, riots, or poor management. These risks come from human actions or inactions.

3. Economic Causes:
These involve uncertainties related to how much people want goods, competition, prices, collecting money from customers, changes in technology or production methods. Financial issues like rising interest rates for borrowing money and higher taxes also fall under this category, as they lead to higher unexpected costs for running a business. Economic factors constantly influence business operations.

4. Other Causes:
These are unexpected events like political problems, mechanical failures (such as a boiler bursting), and changes in exchange rates. These can also lead to possible business risks. Such diverse factors highlight the complex environment businesses operate in.
In simple words: Business risks come from different things. Some are natural, like floods. Some are from people, like employee mistakes or strikes. Others are about money and the economy, like changing prices or new technology. There are also other unexpected things like political issues or machine breakdowns.

🎯 Exam Tip: Classify the causes of risk into broad categories like natural, human, economic, and other to provide a comprehensive explanation.

11th Commerce Guide Insurance Additional Important Questions and Answers

I. Choose the Correct Answer:

Question 1. Presently IRDAI headquarters is in ..........................
(a) Hyderabad
(b) Chennai
(c) Mumbai
(d) Delhi
Answer: (a) Hyderabad
In simple words: The main office of IRDAI, which manages insurance in India, is located in the city of Hyderabad.

🎯 Exam Tip: Remember specific factual details like the headquarters of important regulatory bodies.

Question 2. ............................ is the basic principle behind every Insurance contract.
a) Co-operation
b) Consolidation
c) Co-Current
d) Convenience
Answer: (b) Consolidation
In simple words: The idea of "consolidation" means combining many small risks into one larger group. This allows the insurance system to work by spreading losses across many policyholders.

🎯 Exam Tip: The core principle of insurance involves combining and spreading risks, which is also known as consolidation in a broad sense for mutual protection.

Question 3. When a ship is insured against any type of danger it is known as ..............................
a) Cargo Insurance
b) Marine Insurance
c) Hull Insurance
d) Voyage Insurance
Answer: (c) Hull Insurance
In simple words: Hull insurance is the type of marine insurance that specifically covers the physical body and structure of a ship itself against risks at sea.

🎯 Exam Tip: Differentiate between different marine insurance terms; 'hull' refers to the ship's body, while 'cargo' refers to the goods it carries.

Question 4. Insurance Act was established in the year............
a) 1938
b) 1966
c) 1983
d) 1984
Answer: (a) 1938
In simple words: The main law for insurance, known as the Insurance Act, was first created in the year 1938.

🎯 Exam Tip: Knowing the establishment year of key acts helps in understanding the historical context of insurance regulations.

II. Very Short Answer Questions:

Question 1. What do you mean by Cargo Insurance?
Answer: Cargo insurance is a type of marine insurance. It is taken by the owner of goods (cargo) to get paid if their goods are lost or damaged during a journey. This insurance protects the value of goods being transported, especially by sea. It offers financial security for businesses involved in trade.
In simple words: Cargo insurance pays you back if the goods you are sending get lost or damaged during their journey, like on a ship.

🎯 Exam Tip: Explain that cargo insurance specifically covers the goods being transported, not the vehicle itself.

Question 2. What do you mean by surrender value?
Answer: Surrender value is the amount of money a policyholder receives if they decide to cancel their insurance policy before it fully matures. It is the cash value of the policy. The policyholder gets this amount if they end the contract early. This value usually increases over time as premiums are paid.
In simple words: Surrender value is the money you get back if you decide to stop your insurance policy early.

🎯 Exam Tip: Define surrender value as the cash payout received when a policy is terminated prematurely, emphasizing it's the cash value.

III. Short Answer Questions:

Question 1. What are the objectives of IRDAI?
Answer: The main goals of IRDAI are:
1. To protect the interests and rights of people who buy insurance policies.
2. To encourage and ensure that the insurance industry grows well.
3. To make sure that real claims are settled quickly and to stop cheating and wrong practices.
In simple words: IRDAI's goals are to keep policyholders safe, help the insurance business grow, and make sure claims are paid fast and fairly without fraud.

🎯 Exam Tip: When listing IRDAI's objectives, focus on its roles in consumer protection, industry growth, and regulatory oversight.

Question 2. What is Annuity Policy?
Answer: An annuity policy is a type of insurance where the insured amount or policy money is paid out in regular installments, either monthly or yearly, after the insured person reaches a certain age. This policy is helpful for people who want to receive a steady income after they retire or pass a specific age. It ensures financial stability in later life.
In simple words: An annuity policy gives you regular payments, like a salary, after you turn a certain age. It's good for people who want a steady income later in life.

🎯 Exam Tip: Highlight that an annuity policy provides a regular income stream after a specific age, making it suitable for retirement planning.

Question 3. Write a short note on Amartya Sen Siksha Yojana:
Answer: The Amartya Sen Siksha Yojana is a policy offered by General Insurance companies to help secure the education of dependent children. If the insured parent or legal guardian has a bodily injury solely and directly from an external, violent, and visible accident, and this injury leads to their death or permanent total disability within twelve months, then the insurer will pay for the student's covered education expenses. This payment covers costs from the accident date until the policy expires or the course finishes, whichever comes first, and it will not be more than the amount insured in the policy schedule. This scheme provides crucial support to children's education in unfortunate circumstances.
In simple words: Amartya Sen Siksha Yojana helps pay for a child's education if their parent or guardian dies or becomes fully disabled due to an accident.

🎯 Exam Tip: Explain that this scheme is designed for educational support, covering specific unfortunate events affecting a child's guardian.

IV. Long Answer Questions:

Question 1. Briefly explain the claim settlement.
Answer: There are two main ways health insurance claims are paid:

Cashless:
In this method, the claim amount needs to be approved by a Third Party Administrator (TPA). The TPA is an intermediary between the insurance company and the customer. Once approved, the hospital directly settles the bill with the TPA, so the insured person does not have to pay upfront.

Reimbursement:
In this case, the insured person first pays the hospital bills for their treatment. Later, they can claim the money back (reimbursement) from the insurance company. This is done by submitting all the necessary bills and documents for the claimed amount to the TPA. The policyholder pays first and then gets paid back.
In simple words: When you need to use your health insurance, there are two ways to get money. "Cashless" means the insurance company pays the hospital directly. "Reimbursement" means you pay the hospital first, and then the insurance company pays you back later.

🎯 Exam Tip: Clearly differentiate between cashless and reimbursement claim settlements, explaining the process and roles of TPA in each.

Question 2. Briefly explain the Duties and Function of IRDAI:
Answer: Section 14 of the IRDAI Act, 1999, outlines the duties and functions of IRDAI:

• It gives registration certificates to insurance companies and sets rules for them.
• It provides licenses to insurance middlemen, like agents and brokers, after checking their qualifications and setting rules of conduct for them.
• It helps promote and regulate professional groups linked to the insurance business to make the sector more efficient.
• It sets rules for premium rates and the terms of insurance covers.
• It specifies how insurance companies and other middlemen should prepare and submit their financial reports.
• It regulates how insurance companies invest the money paid by policyholders to keep it safe.
• It also makes sure that insurance companies maintain enough solvency margin, which is their ability to pay out claims when needed.

🎯 Exam Tip: List the key responsibilities of IRDAI, focusing on its role as a regulator, licensor, and promoter of efficiency and solvency in the insurance sector.