Question

Distinguish between the following:

Life insurance and Fire insurance

Answer 1

	Life Insurance	Fire Insurance
Meaning:	A contract whereby the insurance company undertakes to pay a certain sum of money either on death or maturity (whichever is earlier) for a consideration (premium).	A contract in which the insurer promises to pay compensation to the insured if something happens to the subject matter due to fire or related events.
Policy took by:	It can be taken by an individual for his own life or for his family members.	It can be taken by an individual for their properties or by the businessman. For their goods, properties business liabilities.
Subject matter:	In life insurance, the life of the insured is a subject matter.	In fire insurance, the goods and assets or property of the insured is the subject matter.
Insurable interest:	It must exist at the time of the contract.	It must exist both at the time of contract and also at the time of loss.
Tenure:	The policy can be issued for any number of years, even until the death of the assured.	It is generally for a short period, like one year.
Compensation:	It is paid either on death or maturity, whichever is earlier.	It is paid only if there is a loss due to fire during the term of the policy
Principle of Indemnity:	It is not applicable as human life cannot be valued in terms of money for calculating the actual loss.	It is applicable as the insurance company compensates for the financial loss and the insured is brought back to the same financial condition that he was before the event.
Number of policies:	Insured can take any number of policies on the same life. Compensation is paid on all the policies.	Generally, only one policy can be taken but double insurance is possible. However, compensation does not exceed the actual loss.
Beneficiary:	The beneficiary can be insured (if he survives the selected term) or else the nomine or the legal heir on the death of the assured.	The beneficiary is the insured who has insured the property or goods.
Surrender of policy:	The policy can be surrendered before the expiry of the term subject to certain conditions.	It cannot be surrendered.