PPT ON GENERAL INSURANCEPPT ON GENERAL INSURANCE& &

TAXATIONTAXATION

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Meaning of general Meaning of general insuranceinsurance

Insurance other than ‘Life Insurance’ Insurance other than ‘Life Insurance’ falls under the category of General falls under the category of General Insurance. General Insurance comprises Insurance. General Insurance comprises of insurance of property against fire, of insurance of property against fire, burglary etc, personal insurance such as burglary etc, personal insurance such as Accident and Health Insurance, and Accident and Health Insurance, and liability insurance which covers legal liability insurance which covers legal liabilities. There are also other covers liabilities. There are also other covers such as Errors and Omissions insurance such as Errors and Omissions insurance for professionals, credit insurance etc.for professionals, credit insurance etc.

  

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ExamplesExamples are insuring property like are insuring property like house and belongings against fire house and belongings against fire and theft or vehicles against and theft or vehicles against accidental damage or theft. Injury accidental damage or theft. Injury due to accident or hospitalization for due to accident or hospitalization for illness and surgery can also be illness and surgery can also be insured. Your liabilities to others insured. Your liabilities to others arising out of the law can also be arising out of the law can also be insured and is compulsory in some insured and is compulsory in some cases like motor third party cases like motor third party insurance.insurance.

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Why should people buy general Why should people buy general insurance?insurance?

  

Anyone who owns an asset can buy Anyone who owns an asset can buy insurance to protect it against losses due insurance to protect it against losses due to fire or theft and so on. Each one of us to fire or theft and so on. Each one of us can insure our and our dependents’ health can insure our and our dependents’ health and well being through hospitalisation and and well being through hospitalisation and personal accident policies. To buy a policy personal accident policies. To buy a policy the person should be the one who will the person should be the one who will bear financial losses if they occur. This is bear financial losses if they occur. This is called insurable interest.called insurable interest.

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Types of General InsuranceTypes of General Insurance

Fire Insurance Fire Insurance Marine Insurance Marine Insurance Health InsuranceHealth Insurance

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Fire Insurance Fire Insurance – –

Fire insurance is a form of property Fire insurance is a form of property insurance which protects people from insurance which protects people from the costs incurred by fires. When a the costs incurred by fires. When a structure is covered by fire insurance, structure is covered by fire insurance, the insurance policy will pay out in the the insurance policy will pay out in the event that the structure is damaged or event that the structure is damaged or destroyed by fire.destroyed by fire.

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Types of Fire Insurance Policies:Types of Fire Insurance Policies:

Floating policy : Floating policy : This type of policy is This type of policy is subject to average clause and the extent subject to average clause and the extent of coverage expands to different of coverage expands to different properties, belonging to the policyholder, properties, belonging to the policyholder, under the same contract and one under the same contract and one premium. The floating policy also premium. The floating policy also provides protection of goods kept at two provides protection of goods kept at two different stores. Replacement or Re-different stores. Replacement or Re-instatement policy: As per replacement or instatement policy: As per replacement or re-instatement policy, the insurance re-instatement policy, the insurance company instead of paying the company instead of paying the policyholder the amount of indemnity in policyholder the amount of indemnity in cash, replaces the damaged. cash, replaces the damaged. 

Specific policy: Specific policy: In this type of policy, the insurance In this type of policy, the insurance company is liable to pay a sum, which may be less than company is liable to pay a sum, which may be less than the property’s real value. The insured is called to bear the property’s real value. The insured is called to bear a part of the loss, as the actual value of the property is a part of the loss, as the actual value of the property is not considered in deciding the amount of indemnity. not considered in deciding the amount of indemnity.

Comprehensive policyComprehensive policy: Known as “all-in-one” policy, : Known as “all-in-one” policy, the insurance company indemnifies the policyholder for the insurance company indemnifies the policyholder for loss arising out of fire, burglary, theft and third party loss arising out of fire, burglary, theft and third party risks. In this type of policy, the policyholder also gets risks. In this type of policy, the policyholder also gets paid for loss of profits incurred, due to fire, till the time paid for loss of profits incurred, due to fire, till the time the business remains shut. Valued policy: In this type of the business remains shut. Valued policy: In this type of policy, the value of the commodity is already set and policy, the value of the commodity is already set and actual loss is not taken into consideration. The policy actual loss is not taken into consideration. The policy follows a standard contract of indemnity, wherein the follows a standard contract of indemnity, wherein the policyholder gets paid a specific amount of indemnity, policyholder gets paid a specific amount of indemnity, without considering the actual loss.without considering the actual loss.

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Fire Insurance Claim Fire Insurance Claim Procedure Procedure Individuals/corporate must inform Individuals/corporate must inform insurer as early as possible , in no case insurer as early as possible , in no case later than 24 hours. Provide relevant later than 24 hours. Provide relevant information to the surveyor/claim information to the surveyor/claim representative appointed by the representative appointed by the insurer. The surveyor then analyzes insurer. The surveyor then analyzes the extent/ value of loss or damage. the extent/ value of loss or damage. The claim process takes anywhere The claim process takes anywhere between one to three weeks.between one to three weeks.

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  Health InsuranceHealth Insurance

Health insurance, like other forms of Health insurance, like other forms of insurance, is a form of collectivism insurance, is a form of collectivism by means of which people by means of which people collectively pool their risk, in this collectively pool their risk, in this case the risk of incurring medical case the risk of incurring medical expenses.expenses.

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Types of Health Types of Health InsuranceInsurance

Individual Health Plans Individual Health Plans Largely, an Largely, an individual health insurance plan (IHIP), or individual health insurance plan (IHIP), or ‘mediclaim’, would cover expenses if you ‘mediclaim’, would cover expenses if you are hospitalised for at least 24 hours. are hospitalised for at least 24 hours. These plans are indemnity policies, that These plans are indemnity policies, that is, they reimburse the actual expenses is, they reimburse the actual expenses incurred up to the amount of the cover incurred up to the amount of the cover that you buy. Some of the expenses that that you buy. Some of the expenses that are covered are room rent, doctor’s fees, are covered are room rent, doctor’s fees, anaesthetist’s fees, cost of blood and anaesthetist’s fees, cost of blood and oxygen, and operation theatre charges.oxygen, and operation theatre charges.

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SOME PLANS OF HEALTH SOME PLANS OF HEALTH INSURANCE :INSURANCE :

Family Floater Plans Family Floater Plans This is a fairly new entrant in the This is a fairly new entrant in the health insurance firmament. It takes health insurance firmament. It takes advantage of the fact that the advantage of the fact that the possibility of all members of a family possibility of all members of a family falling ill at the same time or within falling ill at the same time or within the same year is low. Under a family the same year is low. Under a family floater (FF) health plan, the entire sum floater (FF) health plan, the entire sum insured can be availed by any or all insured can be availed by any or all members and is not restricted to one members and is not restricted to one individual only as is the case in an individual only as is the case in an individual health plan.individual health plan.

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Senior Citizens’ Plans : Senior Citizens’ Plans : Insurance is Insurance is considered a form of long-term considered a form of long-term savings for senior citizens. This money savings for senior citizens. This money provides financial stability and also provides financial stability and also helps them in times of need. Medical helps them in times of need. Medical insurance enables senior citizens to insurance enables senior citizens to pay for health checkups, emergency pay for health checkups, emergency medical costs and long-term medical costs and long-term treatment.treatment.

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Critical Illness Plans :Critical Illness Plans :

A Critical Illness plan means to insure A Critical Illness plan means to insure against the risk of serious illness. It will against the risk of serious illness. It will give the same security of knowing that give the same security of knowing that a guaranteed cash sum will be paid if a guaranteed cash sum will be paid if the unexpected happens and one is the unexpected happens and one is diagnosed with a critical illness. The diagnosed with a critical illness. The purpose of a critical illness plan is to purpose of a critical illness plan is to let you put aside a small regular let you put aside a small regular amount now, as an insurance against amount now, as an insurance against all this happening.all this happening.

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Unit-linked health plan (ULHP) :Unit-linked health plan (ULHP) :

All ULHPs offer one or more combination All ULHPs offer one or more combination of the other benefits (for which risk of the other benefits (for which risk premium is deducted from fund value). premium is deducted from fund value). Also, charges such as premium Also, charges such as premium allocation charge and policy allocation charge and policy administration charge are deducted administration charge are deducted from the fund value.from the fund value.

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  Marine InsuranceMarine Insurance

Marine Insurance covers the loss or Marine Insurance covers the loss or damage of ships, cargo, terminals, damage of ships, cargo, terminals, and any transport or cargo by which and any transport or cargo by which property is transferred, acquired, or property is transferred, acquired, or held between the points of origin and held between the points of origin and final destinationfinal destination

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  Two Broad CategoriesTwo Broad Categories

Ocean Marine Ocean Marine Insurance Hull Cargo Freight Insurance Hull Cargo Freight Protection and indemnity insuranceProtection and indemnity insurance

  Inland Marine Inland Marine Insurance Extension of Ocean marine Insurance Extension of Ocean marine insurance Domestic goods in transit insurance Domestic goods in transit Property held by Bailees Mobile Property held by Bailees Mobile equipment and property Block equipment and property Block Policies- “all-risks” basis Means of Policies- “all-risks” basis Means of transport and communicationtransport and communication

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Two types of risks are covered by Two types of risks are covered by ocean marine insurance The first type is ocean marine insurance The first type is

the perils of the sea that include both the perils of the sea that include both natural calamities and fortuitous natural calamities and fortuitous accidents.accidents.

The second type of risks covered is The second type of risks covered is extraneous risks. These risks include extraneous risks. These risks include ordinary risks such as theft, pilferage, ordinary risks such as theft, pilferage, rain damage, shortage, breakage, etc rain damage, shortage, breakage, etc and special risks such as strike, war, and special risks such as strike, war, failure to deliver, etc.failure to deliver, etc.

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Hull Insurance Covers : Hull Insurance Covers : physical damage physical damage to ship or vessel Always written with a to ship or vessel Always written with a deductible Contains collision liability deductible Contains collision liability clause Covers owner’s legal liabilityclause Covers owner’s legal liability

Cargo Insurance Cargo Insurance Covers the loss to the Covers the loss to the shipper if the goods are damaged or lost shipper if the goods are damaged or lost Policy can be single or open cargo policy Policy can be single or open cargo policy Salvage loss Follows forced sale of badly Salvage loss Follows forced sale of badly damaged cargodamaged cargo

Freight Insurance Freight Insurance Insures the profit Insures the profit made by a ship owners out of ships used made by a ship owners out of ships used to carry cargo, both their own and others to carry cargo, both their own and others Loss occurs when cargo is not deliverableLoss occurs when cargo is not deliverable

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Major Types of Policy Major Types of Policy

Time policyTime policy

Voyage policyVoyage policy

Mixed policyMixed policy

Open policyOpen policy

Time Policy Time Policy A time policy is one that runs for A time policy is one that runs for a period of time usually not exceeding 12 a period of time usually not exceeding 12 months. In using a time policy, the most months. In using a time policy, the most important question is whether the loss important question is whether the loss occurred at a time in which the policy was occurred at a time in which the policy was running because sometimes it is difficult to running because sometimes it is difficult to prove in case where it is alleged that the prove in case where it is alleged that the conditions giving rise to the loss.conditions giving rise to the loss.

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Voyage Policy Voyage Policy This is a policy that operates for the This is a policy that operates for the period of the voyage. For cargo, the cover is from period of the voyage. For cargo, the cover is from warehouse to warehouse. The policy will not apply warehouse to warehouse. The policy will not apply if the actual voyage and/or ports are different from if the actual voyage and/or ports are different from those in the policy.those in the policy.

Mixed Policy Mixed Policy This is a policy that covers the subject This is a policy that covers the subject matter for the voyage within a time period.It is matter for the voyage within a time period.It is used to cover the cargo from warehouse to used to cover the cargo from warehouse to warehouse with a time limit. The cargo has to be warehouse with a time limit. The cargo has to be warehoused within 60 days after discharge or the warehoused within 60 days after discharge or the policy will no longer cover the cargo.policy will no longer cover the cargo.

  Open Policy Open Policy This is an arrangement in which terms This is an arrangement in which terms such as types of risks to be covered, validity of the such as types of risks to be covered, validity of the insurance contract, rate, premium, maximum insurance contract, rate, premium, maximum value of each shipment and geographical limits, value of each shipment and geographical limits, etcetc

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SERVICE TAX ON GENERAL SERVICE TAX ON GENERAL INSURANCE SERVICESINSURANCE SERVICES

General Insurance BusinessGeneral Insurance Business  means fire, marine or   means fire, marine or miscellaneous insurance business, whether carried on miscellaneous insurance business, whether carried on singly or in combination of one or more of them but does singly or in combination of one or more of them but does not include capital redemption business and annuity not include capital redemption business and annuity certain business.certain business.

InsurerInsurer – Means any person carrying on the general  – Means any person carrying on the general insurance business and includes a re- insurer.insurance business and includes a re- insurer.

Policy holderPolicy holder – It includes a person to whom the whole  – It includes a person to whom the whole of the interest of the policy holder in the policy is of the interest of the policy holder in the policy is assigned once and for all, but does not include an assigned once and for all, but does not include an assignee thereof whose interest in the policy is defensible assignee thereof whose interest in the policy is defensible or is for the time being subject to any condition.or is for the time being subject to any condition.

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In this context, the details in respect of tax In this context, the details in respect of tax payment are as under:payment are as under:

Date from which such service is taxableDate from which such service is taxable –  – 11stst July, 1994 July, 1994

Service providerService provider –  –

An insurer including re- insurer carrying on An insurer including re- insurer carrying on general insurance businessgeneral insurance business

Service receiver –Service receiver –  A policy holder or any personA policy holder or any person

Scope of taxable serviceScope of taxable service – –

Any service provided or to be provided to a Any service provided or to be provided to a policy holder or any person, by an insurer, policy holder or any person, by an insurer, including re – insurer carrying on general including re – insurer carrying on general insurance business in relation to general insurance business in relation to general insurance business.insurance business.