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(d) Insurable Interest

Correct option is (B) Utmost good faith

(1) The principle of subrogation is a colliery to the principle of indemnity. According to the principle of subrogation, after the insured is fully compensated for the total loss of the property or goods insured by him, all the rights in such property or goods pass on to the insurer.

(2) Insured person cannot claim any right in the property saved from the damage or loss, once he is fully compensated by the insurer. This is necessary because, if part of the goods or property saved from the fire, accident, damage, floods or cyclone, etc. could fetch any price, the same cannot be retained by the policyholder or insured. In that case he would realise more than the actual loss, which is against the principle of indemnity.

(3) As like the principle of indemnity, the principle of subrogation is applicable to all insurance policies except life insurance policies. In life insurance contracts, the question of indemnity and subrogation does not arise. The insurer cannot indemnify the insured because the loss due to death cannot be determined exactly in terms of money.

(4) In all insurance contracts, except life insurance contract, principle of indemnity and principle of subrogation are applicable. On indemnifying the insured, the insurer can sell the remains of the property damaged and reduce his loss. However, this principle is applicable only if the damaged property has any value after the happening of the event.

(a) Life Insurance

Correct option is (A) 2

Correct option is (B) 4

The type of insurance where the principle of indemnity is not applicable - Life insurance 

Explanation: 

According to the principle of indemnity, the insurer assures the insured that he/she will bring the insured back to the position he/she was in prior to the occurrence of an uncertain event. Because in case of life insurance, there can obviously be no compensation for the life lost, the principle of indemnity is inapplicable here.

i. Banco

ii. Cold storage

iii. fleet

iv. Mobile

Different types of warehouses are as follows: 

1. Public Warehouse: It is operated in accordance with the law for the purpose of storing goods for other people at profit. Sometimes a large amount of goods arrives in part when it is not convenient for the importer to take it into his custody. During such periods these goods have to be stored somewhere. Similarly, even in trade they have to be stored between the time they are made and the time they are required for use. A public warehouse provides facilities for storing all such goods. It thus renders many useful services to the trade. It enables smaller sellers to carry regional stocks. This factor is very important in competitive markets. 

2. Private Warehouse: This type of warehouse belongs to the owner of goods, usually a wholesaler, who stored his goods. This is in order to supply to retailers in future. Goods are produced in large quantities in anticipation of future demand and for the unknown customers. The ultimate wholesaler finds it necessary to purchases goods in advance in large bulk and to store them for future supply. 

3. Bonded Warehouses: It is one which is licensed to accept imported goods for storage before payment of customs duties. By storing his goods in a bonded warehouse the importer gains some control without paying the duty. The goods in bonded warehouses are under the strict supervision of customs officers and before the owner can interfere with them, previous permission is necessary. 

4. Government Warehouse: This type of warehouse is mainly located at the important sea ports and in most cases is owned by the Dock Authorities. The general public can also use this group of warehouse on payment of fixed charges. If a customer cannot pay the rent within the specified period or time, then the authority can recover the rent by disposing of the goods

The utility functions of the commercial bank are explained as follows:

(1) Issue of drafts and cheques : The Bank draft/cheque is an order issued by the bank upon the other branch of the same bank or other bank to pay money to the person whose name is specified thereon. The bank issues bank drafts to its accountholders or non account holders. However, cheque are issued by the bank only to its account holders. For issuing the bank draft, bank charges some commission.

(2) Locker facility: The bank provides safe deposit vaults to the customers for keeping their valuables like gold ornaments, jewels, securities, valuables, documents, etc. in safe custody. Safe deposit vaults/lockers are made available to the customers on rental basis.

(3) Project reports : As per the request of the clients, bank prepare project report and feasibility study (i.e. a study designed to determine practicability of a system or plan) on their behalf. This helps the business organisation to get funds from the market and clearance from the government authorities.

(4) Gift cheques : The commercial banks also issue gift cheques and gold coins to the customers as well as to the general public by charging nominal charges. It is more popular and has wider acceptance in India. Instead of giving gifts in cash, one can give gift cheques as a present on various occasions such as birthdays, weddings, marriage anniversaries, etc.

(5) Underwriting Services : Underwriting services are given by the banks to the companies in which the bank gives guarantee to the issuing company to purchase unsubscribed portion of the shares, debentures, bonds and other securities if the public demand is not enough to fulfil the minimum subscription amount. For this services bank charges underwriting commission.

(6) Gold related services : Now a days, many commercial banks offer gold related services to its customers. The banks on commercial basis buy and sell gold and gold ornaments to the customers on large scale basis. Some banks even gives advisory services to its customers in regard to gold funds, gold Exchange Traded Fund (ETF) etc.

Correct option is (D) Premium

Principle of indemnity is not applicable to life insurance.

Explanation: 

According to the principle of indemnity, the insurer assures the insured that he/she will bring the insured back to the position he/she was in prior to the occurrence of an uncertain event. As in case of life insurance, the deceased person cannot be made alive again. Hence, the principle of indemnity is inapplicable here.

The different types of warehouses are:

(1) Private warehouses : The warehouses owned and operated by the big manufacturers and wholesalers for storing their own goods are called private warehouses. Big companies which need large storage capacity on a regular basis, can afford to construct and maintain their own warehouses. Many public sector organisations also have their own private warehouses, e.g. the Food Corporation of India (FCI) has constructed warehouses in different parts of the country for its own use. Usually these warehouses are constructed near to ones business factory or industry for convenience. They have network of warehouses in different parts of the country.

(2) Public warehouses : Warehouses which are established to provide storage facilities to the general public, small manufacturers and traders on rental basis are called public warehouses. These warehouses are owned and managed by an individual or co-operative societies. These warehouses are located near railway junctions, highways, waterways, airport, seaport, etc. They are well guarded and specially designed to protect goods from several types of risks. These warehouses have to obtain licence from the government. They provide warehousing facilities at low cost. Many marketing facilities such as standardisation, grading, labelling, packing, branding, etc. are provided in these warehouses.

(3) Bonded warehouses : Warehouses which are licensed by the government to accept and store imported goods till the customs duties are not paid on such goods are called bonded warehouses. These warehouses are managed and controlled by customs authorities. These warehouses are located near the ports. The importers cannot take possession of goods from such warehouses unless and until the duty on the goods is paid. The warehousekeeper is required to give undertaking or ‘Bond’ that without the consent of the customs authorities goods will not be removed from the warehouse. Hence, such warehouses are called ‘Bonded Warehouses’. If an importer is unwilling or unable to pay customs duty immediately, he can withdraw them in instalments and pay customs duty proportionately.

(4) Duty-paid warehouses : The duty-paid warehouses provide the facility of storing the imported goods but not yet sold or transported to importers’ place or godown. These warehouses are owned and managed by the dock authorities only and hence they are also known as public warehouses. These warehouses are located near port and dock areas. They are more useful to importers who re-export the imported goods. The concerned authorities take all the due and reasonable care to ensure their safety. Processing of imported goods such as sorting, re-packing is done in these warehouses.

(5) Government warehouses : Warehouses which are owned, managed and controlled by the Central and State Governments or public authorities are called Government warehouses. These warehouses offer storage facilities to small traders, farmers, businessmen, etc. who are in need of the same on payment of reasonable rent. Central Warehousing Corporation of India (CWC), State Warehousing Corporation (SWC) and Food Corporation of India (FCI) own warehouses for keeping stock of food grains and other goods In different states and countries.

(6) Co-operative warehouses : These are warehouses owned, run, managed and controlled by co-operative societies to provide warehousing facilities to the members who are farmers in rural areas. These warehouses are similar to private warehouses but they run on the principle of co-operation. They are used for storing agricultural commodities, consumer goods, raw materials, etc. Farmers, small producers and traders are benefited by such warehouses as they charge at economical rates.

(7) Cold storage warehouses : Cold storage warehouses are largely used to store and preserve perishable goods such as flowers, fish, eggs, meat, vegetables, fruits, medicines, dairy products, etc. These products are kept in cold storage warehouses at very low temperature so that their quality and freshness would remain intact. These warehouses ensure continuous supply of seasonal and perishable products throughout the year. International trade for seasonal and perishable goods such as green peas, mangoes, etc., becomes possible only because of cold storage facilities.

The principle of utmost good faith is applicable to all types of insurance. 

Explanation: 

The principle of utmost good faith asserts that both parties—the insurer and the insured—must disclose all material facts clearly, completely and correctly. This implies that the insured as well as the insurer should be faithful towards each other. Trust and honesty are the two values that are needed in all types of insurance agreements. Thus, all insurance agreements must be made in utmost good faith.

The amount that an insuree pays to buy an insurance policy is known as premium.

Correct option is (C) Stands null

Types of godowns on the basis of custom (import) duty:
1. Godowns for those goods on which custom duty is paid:

• As the name suggests these godowns store only those goods which are imported from other countries and on which custom i.e. import duty is already paid.
• The need of these godowns arise because many times after importing the goods the owners do not have immediate facility to transport them to the desired destination.
• Owing to such conditions these godowns are located near the place of import such as sea ports, airports or border area. Generally such godowns are also public godowns.

2. Godowns for those goods on which custom duty is not paid (Bonded godowns) :

• A godown that can store imported goods on which custom duty is not yet paid is called a bonded godown.
• These godowns are situated near the place of import such as sea ports, airports,.or border areas.
• These godowns prove blessing for importers because:
• The importer may not be able to pay heavy custom duties immediately at the time .of import.
• The importer may want to re-export the goods from the godown itself.
• These godowns provide facility to the owner to divide, mix and repack the goods so that he can prepare a variety of lots for export.

The insurance policy stands null and void and the insuree can neither claim the compensation nor get back the premium he paid so far.

According to the principle of utmost good faith, the assured is bound to observe complete good faith and disclose all the material facts know to him, relating to his like. If the assured fails to disclose any material facts known to him, the contract can be avoided by the assurer.

It says that both the insurer and insurer have complete faith on each other. Both, the insuree and insurer will provide all necessary information that is needed while entering into an insurance contract.

• Indemnity means protection against future loss. The main objective of an insurance contract is to compensate a future loss.
• This principle is used to decide how much amount an insurance company needs to pay to the insuree in case he faces a loss.
• The insuree can only get the actual compensation for his loss and cannot earn profit i.e. cannot get additional amount other than pre-decide in his insurance policy.
• In case the insuree takes the insurance for a lesser amount then he will get only that much amount for which he has taken the insurance. The remaining loss will have to be borne by him.

Example:

• Assume that the price of a product is ₹ 5 lakh but a person takes insurance of only ₹ 2 lakh. If the product gets damaged completely, or if car is stolen, etc. he can claim an insurance of maximum ₹ 3 lakh only i.e. the insured value and not ₹ 5 lakh.
• In case the product is insured for ₹ 3 lakh and it gets damaged and estimate to repair the product is of ₹ 2 lakh, the insuree may get maximum ₹ 1,20,000 as compensation. This amount is proportioniate of the insured amount i.e. ₹ 3 lakh .
• In case the insuree has taken a full insurance i.e. of ₹ 5 lakh then in event of complete damage he will get the compensation of entire amount i.e. ₹ 5 lakh.

Correct option is (D) Principle of profit

The account suitable for creating saving habit is savings account. 

Explanation: 

A savings account is an account that caters to the needs of those individuals who wish to save a part of their incomes and earn interest on the amount saved. As this account does not allow customers to make frequent withdrawals from their accounts, it promotes the habit of saving among them.

The following are some of the various types of marine insurance policies: 

i. Voyage policy - In this policy, the subject matter is insured for a particular journey, irrespective of the time involved in the journey. 

ii. Time policy - In this policy, the subject matter is insured for a given time period. The policy may contain a continuation clause, according to which the insurance can be extended till the voyage is completed or till the ship arrives at the port. 

iii. Mixed policy - This policy is a combination of the time policy and the voyage policy. It provides protection against sea perils for a particular voyage and for a fixed period of time. 

iv. Valued policy - In this policy, the insurance is of a fixed amount as agreed upon by the insurer and the insured.

The following are the various types of marine insurance policies: 

i. Voyage policy - In this policy, the subject matter is insured for a particular journey, irrespective of the time involved in the journey. 

ii. Time policy - In this policy, the subject matter is insured for a given time period. The policy may contain a continuation clause, according to which the insurance can be extended till the voyage is completed or till the ship arrives at the port. 

iii. Mixed policy - This policy is a combination of the time policy and the voyage policy. It provides protection against sea perils for a particular voyage and for a fixed period of time. 

iv. Valued policy - In this policy, the insurance is of a fixed amount as agreed upon by the insurer and the insured. 

v. Floating policy - In this policy, several shipments are insured under one insurance contract. The policy holds valid till the time the entire amount of insurance is exhausted. 

vi. Blanket policy - In this policy, the maximum amount for which the insurance is required is estimated. In addition to this, the premium for this policy is paid in advance. 

vii. Port risk policy - This policy covers the risk against the damage caused to the vessel while it is being anchored at the port for a given time period. 

viii. Composite policy - This policy is taken by more than one individual. There is more than one insured in this kind of insurance policy. These insured have a separate and distinct liability.

Insurance Regulatory and Development Authority (IRDA):

• The Insurance Regulatory and Development Authority (IRDA) was established in 1999 to analyse and develop the insurance industry in India.
• In India, IRDA is a supreme, autonomous and legal institution which looks after the regulatory and development activities in the field of insurance.
• The IRDA under IRDA Act, 1999 opened up the insurance market and invited Indian as well as foreign companies to set-up insurance business in India.
• Thus the IRDA again took insurance from nationalization to privatization. Initially the foreign companies were allowed to undergo joint venture with Indian companies and hold upto 26% ownership in the joint venture. This was then raised upto 49% ownership by the year 2015.

Main objectives of IRDA:

• To give more choices to policy buyers and holders while selecting an insurance company.
• To promote healthy competition among insurance companies so that customers can get better services at lower premium.
• Accelerate the growth of economy by expanding insurance industry.
• To bring self-discipline among the insurance companies.
• To establish mechanism for complaint redressel, etc.

Since life is considered precious and there cannot be a fixed value assigned to one’s life, a pre-decided amount is fixed by the insuree based on his capacity to pay the premium. Because of this reason, life insurance does not apply to the loss-compensation principle.

Principle of utmost good faith:

• The main objective of selling insurance is not profit but to fulfill specific social objectives of providing financial compensation in cases of pre-defined risks.
• This principle says that both the parties i.e. the insurer and insuree should have mutual and complete faith on each other. This means that the insuree will claim for financial losses only for genuine and pre-defined losses as mentioned in the insurance policy and the insuree will pay the full compensation in case of genuine claims raised by the insuree.
• While entering into an insurance contract both the parties i.e. the insurer and insuree should provide all the necessary information even if it is not asked by either party but if it is felt that the information may have an impact on the contract during claims.
• Any information that one hides and if it affects the claims made for financial loss can be termed as fraud and a breach of the principle of utmost good faith.
• In case the insuree provides wrong information or does not provide some important information during signing the contract and if he faces a financial loss, the insurance company i.e. the insurer will reject the claim and will not refund the paid premium. The insuree then loses all the rights of compensation for the risk.

• Every person feels that when he reaches old age or is no more in this world his family should not be burdened under financial stress. He also feels, education, daily expenses, etc. his family needs like should not be compromised in case he cannot earn further or if he dies.
• Owing to all these reasons a person buys a life insurance. He pays a fix amount i.e. premium periodically to the insurance company until his insurance policy matures or he dies.
• This premium is returned either to the insuree (in case of endowment plan) or his family along with interest. As a result the invested money in insurance becomes a saving scheme whose benefits can be reaped in later years. By doing so the insurance company fulfills its social objective of providing financial compensation as promised.

eMO means Electronic money Order. It is a web based rapid money transfer service where in a receiver can receive the money within 24 hours. One can send a minimum of ₹ 1 to ₹ 5000 through eMO.

Correct option is (B) iMO

Health insurance:

• Health insurance is a type of general insurance that covers the cost of a person’s medical and surgical expenses.
• It is quite useful in case of illness, accidents, etc.
• A person needs to take the health policy for a year and needs to renew it every year before the policy expires.

For transporting liquid and gaseous products such as oil, petrol, PNG, CNG, water, etc.

National Savings Certificate is a government savings certificate or say government savings bond primarily used for small savings under which a person can buy an NSC from post office and claim its interest along with its principle at the end of 5 years or 10 years depending on the maturity of NSC.

Correct option is (D) All of these

Correct option is (C) Current

Correct option is (D) Both (A) and (C)

Correct option is (D) Savings

Correct option is (A) Current

KVP is a savings scheme of postal department under which a person can buy a KVP and in return obtain double his invested money in 100 months. It is available in denominations of rupees 1000, 5000, 10.000 and 50,000.

Under PPF a depositor can open a PPF account in post office with a minimum amount of rupees 500. He needs to maintain this account for 15 years by depositing a minimum amount of ₹ 500 per annum.

Correct option is (B) iMO

Recurring deposit account:

• A recurring deposit account is opened when one wishes to save some money, deposit it regularly in this account and earn an interest at the end of the account term.
• One needs to compulsorily deposit a predetermined amount every month in this account for a pre-determined period. The bank returns the entire amount along with interest to the account holder at the end of the account term.
• The rate of interest is higher than the savings account and lower or almost near to the interest on fixed deposit accounts.

PLI is the abbreviation for Postal Life Insurance. It was started as a welfare scheme for the postal department employees.

Correct option is (C) Recurring

Correct option is (C) PPF

Correct option is (A) Kisan Vikas Patra

Correct option is (A) Gold bonds

Money Order (MO):

• A money order is an order issued by the post office to pay money to the ‘ person on whose name the money order is sent.
• Through this arrangement one can send money from one place to another under post office. The post office will charge a commission to the sender.
• The person who receives the money order will have to sign a receipt which will work as a proof that the receiver has received the money. The signed receipt will be then sent to the sender for confirmation of payment.

The postal department has also started Electronic Post office i.e. e-Post Office. Under this system it offers two advanced level money order procedures. They are:

1. Electronic Money Order (eMO)
2. Instant Money Order (eMO)

1. Electronic Money Order (eMO):

• eMO is a web based rapid money transfer service where in a receiver can receive the money within 24 hours at his address.
• Through eMO a minimum of ₹ 1 to ₹ 5000/- can be sent to any part of India. Once the sender pays the desired amount to the postal department he gets a receipt for the same. The sender needs to properly fill the name and address of the receiver to whom money is to be sent.
• The receiver receives money at his home within 24 hours by showing a photo-id.
• The postal department also sends message to the sender informing the confirmation of payment.
• The sender of eMO will have to go to post office to fill up a form or visit the website of postal department through his computer or mobile to use this service.

2. Instant Money Order (iMO):

• iMO is a web based instant money transfer service where in a receiver can receive money within the next minute the sender sends the money.
• A minimum of ₹ 1000 to ₹ 50,000 can be sent to any part of India.
• Once the sender pays the desired amount to the postal department he gets a 16 digit iMO number. The sender needs to give this number to the receiver secretly i.e. without showing it to anyone.
• The receiver then needs to go to any designated post office, show the iMO number and his photo-id proof on the counter and receive the money.

Correct option is (B) PLI

Correct option is (C) 5