Difference between Different Types of Insurance Contract

Insurance may be defined as a contract between two parties whereby one party called insurer undertakes, in exchange for a fixed sum called premiums, to pay the other party called insured a fixed amount of money on the happening of a certain event.

The insurance contract may be divided into two forms—first life insurance contract and second contract of indemnity.

Occurring of Event

The event, the death, in life insurance is certain, but the only uncertainty is the time when the death will occur. In indemnity insurance {in fire and marine insurances) the even may not take place at all or may take place in part.

Therefore, in life insurance, ordinarily every piece will become a claim sooner or later but it is not certain in indemnity insurance.


The subject-matter in life insurance is life. The chances of death would increase along with the advance in age whatever precautionary measures may be taken for improvement of health whereas the property in other insurance can be repaired and replaced and may remain usually in good condition.

Variance in Premium

In life insurance premium is not much variable whereas in other insurance premium is variable in numerous forms.

Classification of Risk

The classification of risks is generally simpler in life insurance than in other types of insurance contract. In life contract it would be standard, sub-standard and un-insurable but in other insurance it may be several.

Period of Insurance

Generally the life insurance is taken for longer period. Whereas the other forms of insurance are taken for not more than one two years.

Protection and Investment

The life insurance contract provides protection against loss early death and investment to meet the old age requirement-;. Other forms of insurance do not provide investment because the premium paid is not returnable if the contingencies (hazards) do not occur within the period. Other forms of insurance provide only protection against loss on damage of the property against the insured perils.

Premium Payment

The mode of premium payment in life insurance is generally level premium whereas in other forms of insurances, it is single premium.

Insurable Interest

Insurable interest must be at the time of proposal in insurance but in property insurance it must be present at the time of loss.

Difference Between Fire Insurance and Life Insurance

Type of Contract

The fire insurance is a contract of indemnity, where payment of loss will be made only when fire occurred, but the life insurance contract is a contract of certainty, wherein payment is certainly made.

Occurring of Event

The fire may or not occur in fire insurance but in life insurance the death will certainly occur.

Classification of risk

There are numerous types of risk in fire insurance whereas the risks in life insurance are divided into three classes-the standard risk sub-standard risk and uninsurabie risk.

Period of Insurance

The term of insurance in fire insurance does not exceed generally more than one year but in life insurance it lasts for a very long period.

Protection and Investment

Fire insurance includes only the element of protection where as the life insurance includes the element of protection and investment because the premium paid sum assured is returnable in the latter case whereas no premium or amount is returnable in fire insurance.

Insurable Interest

In Fire insurance, the insurable interest must exist from the date of the proposal to the date of completion of the contract whether by death or by expiry of term. In life insurances insurable interest must exist at the time of proposal.

This is the reason that the insured property, insurance policy, or policy amount-cannot be assigned to others in fire insurance whereas it is freely assignable in life insurance.

Moral Hazard

The degree of moral hazard in fire insurance is maximum whereas it is very nominal in case of life insurance.

Difference Between Fire Insurance and Marine Insurance

Fire and marine insurance contracts are similar in most of the cases because both these contracts are indemnity contracts. But, the following differences are observed in both the contracts.

Moral Hazard

In marine insurances, the chances of moral hazard do not exist as much as are in the fire insurance.

Insurable Interest

The insurable interest must exist both the time, at the inception and at the completion of the contract. This is the reason fire insurance policies cannot be freely assignable. The insurable interest in marine insurance must exist at the time of loss. So, the marine policies are freely assignable.


Marine policies generally allow certain margin of profit to be charged at the time of indemnification of loss, but the fire policies do not allow it ordinarily.

Valued Policies

Marine insurance policies are generally valued policies and the market fluctuation is avoided; but the fire polices strictly adhere to the doctrine of indemnity and only the market value of the property at the time of loss (valuable amount) is compensated.