How and why are insurance classified?
The classification of insurance allows to establish differences and similarities of forms and types of insurance, to reduce them to a certain number of groups and thus facilitate their study and practical use.
The classification of insurance divides the whole set of insurance relationships into interdependent links (in the sphere of activity, industry, sub-sector and types) that are in each other in a certain subordination, in such a way that each subsequent link of the classification is part of the previous one. It is also important for understanding the internal structure of insurance, in developing methodological approaches to its assessment, as well as in its theoretical study.
By objects of insurance
Objects of insurance are the main feature of the classification of insurance:
- property insurance – a set of types of insurance, the object of which is the property of legal entities and individuals, for example, insurance of land transport, insurance of air and water transport, insurance of goods, insurance of other types of property;
- personal insurance – the insurance sector in which the object of insurance is life, health, and capacity of citizens, for example, accident insurance, health insurance, life insurance and pensions;
- liability insurance – insurance sector in which the object of insurance is liable to third parties who may be damaged as a result of the activities or inactivity of the insured person, for example, liability of borrowers for non-repayment of loans, liability of owners of vehicles, other types of liability.
For forms of insurance
Insurance may be made in a compulsory and voluntary form:
- voluntary insurance – is carried out on the basis of an agreement between the policyholder and the insurer;
- compulsory insurance – is established by the state in order to protect the interests of both individual policyholders and society as a whole.
In sphere (spheres) of activity or specialization of the insurer
All insurance is subdivided into cumulative (life insurance) and risk (types other than life insurance):
- life insurance (cumulative insurance) - this insurance refers to long-term insurance. Its essence is that the policyholder places its funds not on a bank account, but provides them to the insurance company, which will continue to invest funds in order to receive income for the material provision of a person after reaching a certain age or in case of loss of capacity due to an accident;
- general (risk) insurance – contracts for types of insurance other than life insurance, usually concluded for a term up to one year and are short-term. Such insurance is called risky, because the insurance payment will be made only if the insurance event happens.
Due to the nature of the risk of insurance risks
- for the activities of the insurer (marine, aviation, motor transport, etc.);
- by types of risks (financial, credit, environmental, etc.).
On the status of the policyholder
- insurance of individuals – the individual acts as the subject of insurance;
- insurance of legal entities – the legal entity acts as the subject of insurance.
On the status of the insurer
- state insurance – services are provided by state insurance organizations;
- commercial insurance – services provided by insurance companies, created in the form of joint-stock, full, limited partnerships and companies with additional liability;
- mutual insurance – services are provided by mutual insurance companies.
Insurance forms. What are these and what are they?
In insurance, two forms of realization of insurance relations are known: compulsory and voluntary. The criterion for such a division is the will of the parties. The will of the state through a special law stipulates the obligatory form of insurance, and the will of the policyholders through an application for insurance – voluntary. Consider these two forms in more detail. The initiator of compulsory insurance is the state. The state establishes a mandatory form of insurance, as a rule, in cases where: insurance protection of certain subjects is connected with the interests of not only individual policyholders, but also society as a whole; a certain group of risks is not accepted by insurers for insurance within its voluntary form due to the unprofitability of their insurance; the cost of voluntary insurance is too high for the policyholder; the policyholder underestimates the degree of danger and possible consequences of the insured event, and the public need for insurance…
What is insurance? In simple words, insurance is a monetary compensation that is paid by an insurance company to a person or enterprise, organization or institution of losses from a certain event that is incidental, subject to the conclusion of an agreement with the insurance company.If to speak officially, then - in accordance with Article 1 of the Law of Ukraine "On Insurance" of March 7, 1996, № 85/96-ВР, insurance – a type of civil law relations to protect the property interests of individuals and legal entities in case of occurrence of certain events (insurance cases), determined insurance contract or current legislation, at the expense of money funds…