Detailed, Step-by-Step NCERT Solutions for 11 Business Studies Chapter 4 Business Services Questions and Answers were solved by Expert Teachers as per NCERT (CBSE) Book guidelines covering each topic in chapter to ensure complete preparation.
Business Services NCERT Solutions for Class 11 Business Studies Chapter 4
Business Services Questions and Answers Class 11 Business Studies Chapter 4
Multiple Choice Questions
DTH services are provided by
(a) Transport company
(c) Cellular company
(d) None of the above
(c) Cellular company
The benefits of public warehousing includes –
(c) Dealer relationship
(d) None of the above
Which of the following is not a function of insurance?
(a) Risk sharing
(b) Assist in capital formation
(c) Lending of funds
(d) None of the above
(c) Lending of funds
Which of the following is not applicable in life insurance contract?
(a) Conditional contract
(b) Unilateral contract
(c) Indemnity contract
(d) None of the above
(c) Indemnity contract
CWC stands for –
(a) Central water commission
(b) Central warehousing commission
(c) Central warehousing corporation
(d) Central water corporation
(c) Central warehousing corporation
Short Answer Questions
Define services and goods.
Services are those separately identifiable, essentially intangible activities that provide the satisfaction of wants, and are not necessarily linked to the sale of a product or another service.
A good is a physical product capable of being delivered to a purchaser and involves the transfer of ownership from the seller to the customer. Goods are also generally used to refer to commodities or items of all types except services, involved in trade or commerce. While goods are produced, services are performed. A service is an act which cannot be taken home.
What we can take home is the effect of the services. There are five basic features of services. These features also distinguish them from goods and are known as’’ intangibility, inconsistency, inseparability, inventory and involvement (five I’s). Service facilities help ensure the supply of the right place at the right time. These facilities ensure a smooth flow of exchange of goods and services. Efficient service facilities provide the following benefits:
- Improved customer service.
- Lower distribution costs.
- Additional sales volume.
- Time and place utilities.
- Stabilization of prices.
Services required in business are transportation banking, insurance, communication, and warehousing.
What is e-banking. What are the advantages of e-banking?
Electronic Banking (E-Banking)
These days banks have been providing the following new services due to the introduction of computerised equipments :
(1) Electronic Funds Transfer System (EFTs) – It allows transfer of funds electronically. It is a cost-saving scheme for the convenience of customers. Under the scheme the banks transfer the wages and salaries from company’s account to employees’ accounts as per the instruction of the employer.
This system removes the risk and inconvenience of handling cash. Similarly, a company can distribute dividend to its shareholders electronically. This is very safe method of transfer money.
(2) Automated Teller Machine (ATMs) – It is a free-standing self-service terminal which renders the facility of withdraw and deposit a money. While using ATM a plastic card is inserted into the terminal. After that identification code is also inserted. The machine responds by delivering required cash, cashing cheques, taking deposits and simple banking transactions.
(3) Debit Card – The card issued to the Bank Account holders against their bank balance to facilitate and simplify the payment, withdrawal and transfer of money any time, any where through the computer is known as Debit Card. There is no overdraft facility to Debit Cardholders. There is no fee interest and charge for issuing these cards. These cards are being issued in India by ICICI, HDFC, HSBC, Citi Banks, SBI, PNB etc.
Under the scheme point-of-sale (POS) terminals are located at merchants check out counters audited electronically to a bank computer. When the customer presents a debit card, the point-of-sale terminal automatically)
transfers the money for the purchase from customer’s account to store’s account. Under this system an individual can pay bills automatically by using a personal computer, which is linked by telephone to the bank computer.
Net Banking – In order to provide convenience to the customers for banking anytime, anywhere in the world, net banking is used. Customers are provided secured log in id and password through which they can access their account and make transactions like account balance enquiry, cheque book request, fund transfer etc.
(4) Credit Card – It is also called plastic money as it allow the cardholder to withdraw money without depositing. The card issued to selected customers to enable them to make payment of credit bills upto specified limit any time anywhere through computer is known as credit card. It is also used for withdrawing cash from ATMs.
The amount overdrawn is repaid upto specified date. Interest is charged if payment is not made upto specified date. The credit card system has facilitate simplified encourage credit transactions.
Credit card is a substitute for cash that can be used by selected customers. It is the key to the opening of bank account for daily payments. It provides overdraft facilities also. These are plastic cards having the photo identity and the signature embossed on the cards. It also contains issuing bank’s name and validity period of the card. The credit card holder has to deposit the amount withdrawn along with interest due to credit and company or bank.
Write a note on various telecom services available for enhancing business.
The various types of telecom services are:
(i) Cellular mobile services:
These are all types of mobile telecom services including voice and non-voice messages, data services, and PCO services utilizing any type of network equipment within their service area. They can also provide direct interconnectivity with any other type of telecom service provider.
(ii) Radio paging services:
Radio paging service is an affordable means of transmitted information to persons even when they are mobile. It is a one-way information broadcasting solution and has spread its reach far and wide. Radio paging services are available including tone only, numeric only, and alpha / numeric paging.
(iii) Fixed line services:
These are all types of fixed services including voice and non-voice messages and data services to established linkages for long-distance traffic. These utilize any type of network equipment primarily connected through fiber optic cables laid across the length and breadth of the country. They also provide interconnectivity with other types of telecom services.
(iv) Cable services:
These are linkages and switched services within a licensed area of operation to operate services. The two-way communication including voice, data and information services through cable networks would emerge significantly in the future. Offering services through the cable network would be similar to providing fixed services.
(v) VSAT services:
VSAT (Very Small Aperture Terminal) is a satellite-based communications service. It offers businesses and government agencies a highly flexible and reliable communication solution in both urban and rural areas. Compared to land-based services, VSAT offers the assurance of reliable and uninterrupted service that is equal to or better than based services.
It can be used to provide innovative applications such as telemedicine, newspapers, online, market, rates, and tele-education even in the most remote areas of our country.
(vi) DTH services:
DTH (Direct to Home) is again a satellite-based media service provided by cellular companies. One can received media services directly through a satellite with the help of a small dish antenna and a set-top box. The service provider of DTH services provides a bouquet of multiple channels. It can be viewed on our television without being dependent on the services provided by the cable network services provider.
Explain briefly the principles of insurance with suitable examples.
Fundamental Principles Of Insurance
(1) Principle of utmost good faith (uberrimate fide). This principle implies that the insurer and insured must disclose all the material facts apd information to each other. Material facts, here means all the important information, which would have affected the insurance policy as regards accepting the risk at that rate of premium.
Concealment of the material fact wi 11 make the contract voidable at the discretion of the aggrieved party. For example, the insured is a cancer patient but does not disclose this material fact in his proposal form. If the insured dies of cancer, the insurance company is not liable to pay the insurance money.
In case of fire insurance if certain flammable material like patrol is stored in the godown, it must be intimated to the insurance company. If this fact is concealed and the godown catches fire, the insurance company will not be liable to compensate for damages. Misrepresentation or failure to reveal material information gives the affected party the right to cancel the control.
(2) Principle of insurable interest – It is the basic and essential requirement of an insurance contract that the person taking the insurance policy must have personal and direct insurable interest in the insured person or property. The insured must have insurable interest.
The person is said to have an insurable interest, when he stands to gain with the safe existence of the insured person or property and would suffer personal loss due to the destruction of the insured. The objective behind this principle is that the insured should be compensated for the loss.
The loss will be suffered by the insured, if his own personal property is destroyed. He cannot be said to have suffered loss due to the destruction of the property of someone else. In case of life insurance, it must be present at the time of falling the policy. In fire insurance, both at the time of calling policy and at the time of actual loss.
(3) Principle of Indemnity – All insurance contract, except life insurance, are contract so find enmity. The objective behind this principle is to place the insured person as far as possible in the same financial position which he had enjoyed before the loss. In case of loss the insured will be paid the amount of actual loss or the amount of the policy, whichever is lesser.
The policy behind this arrangement is that nobody should treat insurance contract as the source of profit. The purpose of this principle is to put the insured in the same position after the event happened in which he was immediately before the event.
Example – The owner of the house gets his house insured for Rs. 10,00,000. Unfortunately the house catches fire and half of the house is destroyed. In this case the insurance company will pay only Rs.5,00,000 as compensation. It is the amount of actual loss. Suppose the house was worth Rs.20,00,000 but insured for Rs. 10,00,000. In this case if the entire house is fully destroyed, the insurance company will pay only Rs. 10,00,000. If half of the house is damaged the insurance company will pay Rs.5,00,000 only.
(4) Principle of Mitigation of losses – In the event of misshaping it is the duty of the insured that he must take all reasonable steps to minimise the loss in the same manner, which he would have done if the property was not insured. If the insured suffers any loss or incurs expenses in minimising the loss, he can recover the loss from the insurers.
If it is proved that the insured did not take steps to minimise the loss, which many prudent persons would have done, simply because the loss will be borne by the insurance company not by him, the insurance claim may be lost. The insured must act in the same manner as he would have gone, if the property were not insured.
(5) Principle of causa Proxima – According to this principle compensation is paid to the insured if the causes responsible for loss were insured. In case, the cause of the loss was not insured, compensation is not paid. The insured risk must be the proximate or nearest not remote. If the risk insured is the remote cause of the loss, then the insurer is not bound to pay compensation.
In case of marine insurance, shipping company is held responsible for certain risks, some risks are borne by the owner of goods and the insurance company is held liable if the loss is caused by the insured risk. If the loss is due to many complex causes, the nearest cause of the loss is ascertained.
For example, sugar sent by ship was insured against sea hazards. Rats made hole by cutting the pipe of the toilet. Sea-water entered through-hole and the sugar was destroyed. In this case, the nearest cause of the loss of sugar is the seawater, a risk, which was insured and the insurance company will be liable for risk. If the rats would have damaged the sugar directly insurance company would not have been liable for the risk.
(6) Principle of subrogation – Do6trine of subrogation states that after making compensation for the loss, the, insurer steps into the shoes of the insured. It means that the insurance company becomes entitled to exercise all the rights and remedies, which the insured had in respect of the property.
Let us take an example. Anil ensured his factory for Rs. 4,50,000. There was partial damage of the factory by fire due to the negligence of employee Anil’s claim for Rs.2,00,000 was admitted by the insurance company and paid later on. An filed a case against employee and received Rs.40,000 as compensation. The insurance company is entitled to receive Rs.40,000 from Anil which he received from employee.
(7) Principle of contribution – It implies that when property is insured for the some risk with two or more insurers, the different insurers will contribute to the total payment in proportion to the amount assured to each. In case one insurer has paid full compensation of loss, he is entitled to receive proportionate contribution from other insurers.
For example, A gets his house insured against fire for Rs. 1 lakh with insurer B and for Rs.50000 with insurer C.A loss of Rs.75000 occurs to the house due to a fire. Then, B is liable to contribute Rs.50000 and C Rs.25000. In case B pays the whole amount of loss, he can recover Rs.25000 from C. This principle is not applicable to life insurance.
Explain warehousing and its functions.
Meaning Of Warehousing
A warehouse in simple language is the place used for the storage or accumulation of goods. Warehousing means holding and preservation of goods from the time of their production or purchase and until their sale or use. It involves making suitable and effective arrangements for keeping the goods in proper condition.
A warehouse is a place used for the storage of surplus goods. It helps the businessmen to keep suits during dull session. It may also be defined as an establishment that assumes responsibility for the safe custody of goods. Warehousing enables businessmen to produce goods throughout the year and sell them whenever there is adequate demand. It creates time utility by bridging the time gap between production and distribution of goods. Thus, warehousing creates time utility.
Functions of Warehouses
A modern warehouse performs the following important functions:
(1) Storage-The basic function of a warehouse is to store the surplus goods which are not needed immediately. Surplus goods are preserved and made available when required. A warehouse acts as a reservoir or storehouse of surplus goods and made available whenever they are demanded by the customers.
(2) Safety of Goods-A warehouse protects goods against pilferage, theft and damage. Goods are preserved safely from rain, sun, moisture, pests, fire, etc. Perishable goods such as fruits, vegetables, eggs, etc. can be preserved in cold storages. Thus, warehouses provide for the safe custody of goods.
(3) Price Stabilisation – Warehouses facilitate the smooth supply of goods and remove the fluctuations in the prices of goods. A warehouse enables businessmen to store excess goods and thereby avoid emergency sale. In the absence of storage facilities they have to dispose of the entire stock as soon as it is produced.
In warehouses available goods can be stored when they are in abundant supply and released when the demand is high. Thus, fall in prices is checked when the supply is at its peak and rise in prices is avoided during the slack season. In this way, producers can realise better prices and consumers can buy goods at reasonable prices.
(4) Risk Bearing- Warehouses safeguard the stock of goods against damage due to fire or theft. Once goods are handed to a warehouse the responsibility for ensuring the safety of goods passes to the warehouse¬keeper. The risk of loss or damage is borne by the warehouse-keeper. Moreover, goods kept in a recognised warehouse can be insured at a low premium. In case of loss or damage the value of goods can be recovered from the insurance company. Building of warehouses are specially constructed to safeguard the goods against several risks.
(5) Financing – In India, warehouse authorities advance money to owners of goods on security of goods deposited. Warehouses issue receipts to the persons who keep their goods on rent in warehouses. The receipt issued by a warehouse is a good collateral security against which money can be borrowed from banks and other financial institutions. In this way, warehouses help in financing trade.
(6) Mass Production – A warehouse removes the hindrance of time of production and consumption. Warehouses facilitate production in anticipation of demand. They create time utility by bridging the time gap between production and demand. In the absence of warehouses, the scale of production will be restricted to the level of current demand. Warehousing enables businessmen to avail of the economics of large- scale production and bulk-buying.
(7) Facilities-Warehouses provide facilities of processing, packing, blending etc. for the purpose of sale. A modern warehouse provides several facilities to businessmen. Goods can be prepared for sale by arranging them in small and suitable lots. They can be repacked, graded, blended and labelled. Prospective buyers can be taken to the warehouse for inspecting the goods. A warehouse can also deliver goods strictly according to the instructions of their owner.
(8) Employment – Warehouses provide jobs to a large number of persons. They offer direct employment and also generate employment opportunities by increasing the scale of operations.
(9) Facilitate Foreign Trade – An importer can keep the imported goods in bonded warehouses if he is unable or willing to pay customs duty immediately. He can pay duties in installments and draw goods gradually.
Long Answer Questions
What are services? Explain their distinct characteristics?
Services are essentially intangible activities which are separately identifiable and provide satisfaction wants. Their purchase does not result in the ownership of anything physical Services involve an interaction to be realized between the service provider and the consumer.
Services are intangible, i.e., they cannot be touched. They are experiential in nature. One cannot taste a doctor’s treatment, or touch entertainment. One can only experience it. An important implication of this is that the quality of the offer can often not be determined before consumption and, therefore, purchase.
It is, therefore, important for the service providers that they consciously work on creating the desired service so that the customer undergoes a favourable experience. For example, treatment by a doctor should be a favourable experience.
The second important characteristic of services is inconsistency. Since there is no standard tangible product, services have to be performed exclusively each time. Different customers have different demands and expectations. Service providers need to have an opportunity to alter their offer to closely meet the requirements of the customers. This is happening, for example, in the case of mobile services.
Another important characteristic of services is the simultaneous activity of production and consumption being performed. This makes the production and consumption of services seem to be inseparable. While we can manufacture a car today and sell it after, say, a month this is often not possible with services that have to be consumed as and when they are produced.
Service providers may design a substitute for the person by using appropriate technology but the interaction with the customer remains a key feature of services. Automated Teller Machines (ATMs) may replace the banking clerk for the front office activities like cash withdrawal and cheque deposit. But, at the same time, the presence of the customer, is required and his/her interaction with the process has to be managed.
(iv) Inventory (Less):
Services have little or no tangible components and, therefore, cannot be stored for a future use. That is, services are perishable and providers can, at best, store some associated goods but not the service itself. This means that the demand and supply needs to be managed as the service has to be performed as and when the customer asks for it.
They cannot be performed earlier to be consumed at a later date. For example, a railway ticket can be stored but the railway journey will be experienced only when the railways provide it.
One of the most important characteristics of services is the participation of the customer in the service delivery process. A customer has the opportunity to get the services modified according to specific requirements.
Explain the functions of commercial banks with an example of each :
Commercial banks are very popular in every country due to services rendered by them. A commercial bank is a financial institution; which deals in money and credit. It accepts deposits from those who have a surplus and lends to those who need them. The difference between the rate of interest on deposits and loans is the profit of the bank.
Definition of the Bank – According to Indian Banking Companies Act 1949, “A bank is an institution accepting for the purpose of lending or investment in deposit money from public repayable on demand or otherwise, withdrawal by cheque, drafts, order or otherwise’.
In the words of R.S.Mayers, “Banks are institutions whose debts are referred to as ‘bank deposits ’ and they are commonly accepted in final settlement of ‘other people s debts ’
According to Justice Holmes, “The real business of banker is to obtain deposits of money which he may use for his own profits by lending it out again ‘
Bank is German word, which means ‘to collect’. The main function of the bank is the collection of funds as deposits. Later on bank started performing other functions such as lending etc.
Bank has occupied very important place in the economic structure of the country. After independence in order to achieve social objectives of the country banks were nationalised. According to 20 point programme of the government banks have been entrusted the responsibility for developing the undeveloped regions of the country.
In the light of these recent thinking, banks may be defined as the financial institution dealing in money and credit to achieve the economic and social objectives of the business. In India, some of major commercial banks are – State Bank of India, Punjab National Bank, Bank of Baroda, Canera Bank and Syndicate Bank etc.
Functions Of Commercial Bank
(1) Accepting deposits – This is one of the primary function of the bank. The main purpose of banks is to promote savings and accept deposits from customers. Banks offer facilities in different ways to suit the needs, tastes and preferences of the customers. Deposits are accepted mainly in current, savings, fixed deposit, home safe and recurring deposits accounts.
(2) Advancing loans – This is also the important function of the bank. The bank advances loans to merchants and manufacturers at higher rates of interest than what it allows on deposits. The difference between the two rate of interest is the profit of the bank. The bank advances loans through cash credit, bank overdraft, discounting of bills etc.
(a) Cash credit- In this method, the bank instead of making payment to the borrower in cash, deposits the money in the Current Account, opened in the name of the borrower. The borrower can withdraw the money by using cheques upto specified limit. The bank asks the borrower to submit a promissory note for the loan. Cash credit is like overdraft arrangement, but for this purpose it is not necessary to operate a current account. Interest is to be paid on the amounts with drums.
(b) Bank overdraft – This facility is granted by the bank to its current account holders. Under this arrangement the customer is authorised to withdraw more than the amount deposited. The amount of overdraft is settled between the bank and customer. This facility is granted without holding security’. Interest is charged by the bank on the amount actually withdrawn on monthly basis. In practice the customer pledges security of stock of goods.
(c) Discounting of the bills – Financial help can also be sought from the bank by discounting Bills of exchange before the due date. The bank charges interest in the shape of discount for the period between date of discounting and the due date of the bill. The bank pays the amount or credits the amount into the account of the drawer after deducting discount.
3. Agency functions – Commercial banks perform the following agency functions:
(a) Collection of cheques, bills and drafts- Bank collects cheques, drafts and bills on behalf of its customers. The customer deposits his cheques received from outside parties, bills accepted by other parties and bank drafts received from outside. Bank collects the amounts of these documents and credits the money into the customers’ accounts.
(b) Collection of interest and dividends etc. – The customer may – have invested in shares and debentures and received interest and dividend.
The bank may be instructed to collect interest and dividend on behalf of the customer and deposit in his account.
(c) Payment of interest, instalment of loan and insurance premium etc.-The customer may instruct the bank to make the payment of his instalment of loan borrowed by him and interest thereon. He may also instruct the bank to make payment of his insurance premium, rent of the shop, factory, residence etc. The bank, after making payment of these expenses debits the amount to customers’ account.
(d) Purchase/Sale of securities – The bank can also work as an agent of the customer and assist in purchasing/selling shares, debentures, bonds, certificates and government securities.
(e) Transfer of funds through drafts/mail transfers – Bank provide facilities to transfer funds from one place to another place at nominal charges. Bank also provides the facility of purchase and sale in foreign currencies.
4. Other services – In addition to agency services banks provide other miscellaneous services also:
(a) Issuing travellers cheques – There is always risk to undertake long journey from one place to another place with large sum of money in cash. Banks issue travellers cheques for the desired amount. The cheque can be encashed for the desired amount at different places. The amount paid against cheque are entered at its back. The total amount withdrawn cannot exceed the amount of the cheque. Travellers cheque ensure safe journey without risks.
(b) Issuing letter of credit – The bank issues letter of credit on-demand to its customers. Sometimes suppliers of goods and lenders of money insist upon letter of credit issued by the bank.
(c) Locker or custodial services – There is always great risk in keeping large amount of cash, jewellery and other valuables. The bank offers an opportunity in the form of lockers in the premises of the bank itself, where valuables can be kept on payment of nominal charges. There are two or three keys of the locker, so for opening and closing it both the keys (one kept by the bank and the other kept by the customers) are used. The locker is operated by the customer as and when required.
(d) Underwriting securities – Underwriting means undertaking the risk to subscribe for shares and debentures of Companies in case applications from public fall short. Banks also underwrite shares and debentures of companies. In this way, banks help in building and strengthening capital market.
(e) Dealing in foreign exchange – Foreign currency is required for import, export, foreign travel and all sorts of foreign dealings. We can get foreign exchange through banks.
(f) Providing references – Sometimes creditors and money lenders require from the customers trade references, preferably from banks. Reference services are also provided by the government.
(g) Issuing bank drafts – Bank drafts are the economical and safest means of sending money. It is an instruction of the bank to its branch to pay the certain specified amount to the particular party. These bank drafts can be obtained against bank account and can also be obtained by cash payment.
(h) Advisory functions – Bank also functions as a friend, philosopher and guide of his customers. Bank renders advisory services on economic matters to its customers.
Write a detailed note on various facilities offered by the Indian Postal Department.
Indian post and telegraph department provides various postal services a cross India. For providing these services the whole country had been divided into 22 postal circles. These circles manage the day-to-day functioning of the various head post offices, sub-post offices and branch post offices. Through their regional and divisional level arrangements, the various facilities provided by postal department are broadly categorized into:
(i) Financial facilities:
These facilities are provided through the post office’ savings scheme like Public Provident Fund (PPF), Kisan Vikas Patra and National Saving Certificates in association to normal retail banking functions of monthly income schemes, recurring deposits, savings account, time deposits and money order facility.
(ii) Mail facilities:
Mail services consist of parcel facilities that is the transmission of articles from one place to another; registration facility to provide security of the transmitted articles and insurance facility to provide insurance cover for all risks in the course of transmission by post.
(iii) Financial services: (SCSS, PPF, KVP, NSC, TDJ)
Senior Citizen Savings Scheme (SCSS): Any individual who has attained the age 60 years on the date of opening or who has attained the age of 55 years and who has voluntarily retired from the service can open this account. Here, the account holder gets an attractive interest. Automatic transfer of interest into savings account facility is available.
Joint account is opened with the spouse only and not with any other person. The amount of deposit is Rs. 500/- and maximum is Rs. 1.0 lakh. Subject to certain conditions loan facilities are available after 3 years. The investment by an individual will qualify for tax deduction under section 88 of IT Act. .
(iv) Kisan Vikas Patras (KVP):
The certificates will be available in the denominations of Rs. 100, Rs.500, Rs. 1000, Rs.5000, Rs. 10000 and Rs.50000. certificates will be issued to individuals only. There is no limit for purchase. Certificates can be cashed at any time after expiry of 2 years and 6 months from the date of purchase. Nomination and identity slip facilities are available. .
(v) National Saving Certificate (NSC):
NSC VIII Issue available in denominations of. 100,500,1000,5000 and 10,000 can be issued to individuals only. The maturity period shall be 6 years from the date of issue. There is no limit for purchase. Only local cheques are accepted. They can be pledged as security.
A nomination facility is available. No premature encashment is permitted in the normal course. Investments by individuals will qualify for tax deduction under Income Tax Act.
(vi) Time Deposit Accounts (TD):
There are four types of accounts, namely 1-year, 2-year, 3-year and 5-year accounts. A single can open an account, two adults jointly, Guardian on behalf of a minor or a minor himself who has attained the age of 10 years. Any number of accounts can be opened. There shall be only one deposit in an account.
The deposit should be in multiples of Rs. 200 and there is no maximum limit. Annual interest can be automatically credited to the savings account of the depositors, Post maturity interest shall be allowed for a maximum period of 24 months SB rate premature closure of the account is permitted on some conditions.
Describe various types of insurance and examine the nature of risks protected by each type of insurance.
1. Life Insurance
Life insurance is a contract between a person and an Insurance company. According to the contract of insurance a specified sum of money is payable by insurance company on the death of the insured or after the expiry of the policy period, whichever is earlier in consideration to the payment of the premiums, whenever due. The amount of the premium is determined on the basis of the amount of the policy, the period of the policy and terms of the premium, whether monthly, quarterly, half-yearly or annually.
There is an element of investment in the life insurance, because the amount of the policy is received in both the cases i.e. on the death of the insured or at the expiry of the policy. Life insurance is not a contract of indemnity because it is impossible to compensate the deceased policyholder. The person whose life is insured is called the assured. The consideration paid to the insurance company is premium. It is based on good faith and based on insurable interest in the like assured.
2. Fire Insurance
Fire insurance is an agreement between the insurance company and the owner of the property, wherein insurance company, after receiving specified premium assures actual loss or the amount of the fire policy (whichever is less) will be paid if the insured property catches fire.
Fire insurance is a contract of indemnity. It is based upon the principle of good faith. The insured must have an Insurable interest in the subject-matter of Insurance. It must exist both at the time of insurance and at the time of loss. It is a contract from year to year on a renewable basis.
3. Marine Insurance
Marine insurance is an agreement in which the insurance company assures to compensate for the loss, if any, caused by insured marine perils after the receipt of the premium. Marine policies can be taken for the ship, loaded goods (cargo) for freight” and salaries of employees etc.
This contract is based on utmost good faith. Both the insured and the insurer must disclose everything which is in their knowledge and can affect the contract. Insurable interest must exist at the time of actual loss incurred and based on the approximate cause for which insurance policy is taken.
4. Miscellaneous Insurance
Some important types of insurance have been discussed below:
(1) Motor Vehicle Insurance – Under this insurance vehicles on roads such as motors, trucks, cars, vans, motorcycles, scooters etc. are insured. If the insured vehicle is lost or damaged or becomes the victim of accident, the insurance company compensates for the actual loss or the amount of the policy, whichever is lower. If the insured vehicle causes damage to any other vehicle the insurance company will compensate to the owner of other vehicle. Motor vehicle insurance is classified as follows:
(a) Comprehensive Insurance — This insurance covers all types of risk causing damage to the insured vehicle.
(b) Third Party Insurance – If any vehicle causes damage to any person or vehicle the owner of the vehicle will compensate. The insurance company under Third Party Insurance will compensate to the owner of vehicle only.
(2) Burglary Insurance – Under this insurance, loss due to theft or burglary is compensated by the insurance company. While taking policy detailed information of the article to be insured is furnished. The insurance company compensates for the loss of the insured due to theft or burglary. Insured items may include gold and ornaments, other household items such as refrigerator, T.V., Air Conditioners etc.
(3) Personal Accident Insurance – This insurance policy is taken to compensate for the loss caused by accident. If the insured person dies or meets any fatal accident, the insurance company makes the payment of the insured amount to the person himself if he survives or to the nominee of the insured person, if he dies. In case of partial disability the amount is paid according to the terms and conditions of the insurance policy. The insurer, in an accident policy, is liable only if the unfair or death is caused by an accident and not due to natural causes.
(4) Fidelity Insurance-This insurance policy protects against the loss caused by embezzlement, dishonesty and fraud of employees. In order to protect itself from losses caused by these misshaping the insurance company guarantees to compensate for the loss caused by dishonesty of employees. If the business suffers any lose due to the fraud of the employee, the insurance company compensates for it. In case of this insurance policy the business cannot make any change in the service conditions of the employee without consulting insurance company.
(5) Employees Accident Insurance – Workers working in the factory may be subjected to any accident.at any time while working in the factory. In case of partial loss of limbs or disability, the owner of the factories have to compensate for the loss to the employees as per the provisions of factory act. If the factory owner desires, he can get the risk insured with the insurance company. In the case of insurance, the insurance company will have to compensate the employee.
(6) Health Insurance – Under this insurance policy medical expenses of illness and disability are covered by the Insurance. This type of Insurance can transfer the burden, of the costs of illness or accident, so that people do not have to face financial ruin, because of poor health. This insurance covers basic medical expenses, major medical expenses, disability income and long term hospitalization reimbursement of charges.
Explain in detail the warehousing services.
Functions Of Warehousing
(1) Stability in prices-Warehousing maintains the stability of price by storing goods in the godown and releasing as per requirements of the market. Prices of seasonal commodities can be stabilised. Warehousing help in removing violent fluctuation in the prices of goods through smooth supply throughout the year.
(2) Surety for loan – The warehouse receipt can be deposited with the bank and the lending institution as security against loans borrowed.
(3) Storage facility—Surplus goods required to be used in future can be stored in godown and taken back, whenever required.
(4) Safety of goods – Godowns are specially made to keep goods safe. Certain godown storing specific commodities are built to suit the nature of the commodity. Goods are always safe in their proper godowns. Godown safeguards the show of merchandise from deterioration pilferage and vastage etc.
(5) Other functions-Warehouses provide facilities for grading and packaging of goods. In case of bonded warehouse, the importer gets reasonable time to arrange funds to make the payment of customs and other dock charges.
Importance Of Warehousing
Goods are stored by manufacturers, producers, farmers, wholesalers and even retailers. Storage and warehousing have the following advantages and importance:
(1) Protection of goods-A warehouse protect goods against pilferage, theft and damage. After keeping goods in the godown the businessman are carefree. Goods are preserved free from rain moisture, pests, fire etc.
(2) Useful for seasonal goods – There are certain things which are produced once in a year and used throughout the year, such as wheat, rice, sugar, potatoes etc. By keeping goods in the warehouses, goods are available throughout the year.
(3) Seasonal consumption of goods – There are certain commodities which are produced throughout the year but consumed during the season. These commodities are woolen garments, heaters, coolers etc. As such in order to maintain balance between demand and supply these commodities are required to be stored safely. A warehouse acts as a reservoir of store house of surplus goods.
(4) Production to meet future demand – These days goods are produced on a large scale in anticipation of future demand. There is time gap between the production and consumption of goods. It is, therefore, necessary that goods should be kept safe and secured during this period.
(5) Storage of raw material – Production is a continuing activity, so raw material is required throughout the year. Supply of raw material can be maintained throughout the year by proper storing of raw material.
(6) Stability of prices – In order to maintain the stability of price, it is necessary that surplus goods during the season should be stored and brought out during the offseason. This will also check the fluctuation of price.
(7) Facilitating foreign trade – An importer can keep the imported goods in bonded warehouses if they is unable or unwilling to pay custom duty immediately. He can pay duties in installments and draw goods gradually.