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Class 11 Business Services: cheat sheet
CBSE Business Studies. Services and their features, banking and e-banking, the principles and kinds of insurance, and communication, transport and warehousing services.
Key ideas
- Services are intangible, inconsistent, inseparable (made and used at the same time), cannot be stored, and need the customer’s involvement.
- Commercial banks accept deposits (current, savings, fixed), lend through overdrafts, cash credit and loans, and send money by cheque, draft and online transfer.
- E-banking lets customers bank at any time and place; NEFT settles transfers in batches, while RTGS settles large sums one by one, at once.
- Insurance spreads risk: many people pay a small premium so that the few who suffer a loss are compensated.
- Its seven principles are utmost good faith, insurable interest, indemnity, proximate cause, subrogation, contribution and mitigation of loss.
- Life insurance is not a contract of indemnity, because a life cannot be valued in money; fire and marine insurance are.
- Warehouses (private, public, bonded, government, cooperative) remove the hindrance of time and help with consolidation, break-bulk, stockpiling and steady prices.
Remember
| Claim under indemnity | the smaller of the actual loss and the sum insured |
| Contribution between insurers | each pays loss × its sum insured ÷ total sum insured |
| Interest on a fixed deposit | P × R × T ÷ 100 |
| Overdraft | amount withdrawn − balance; interest is charged on the overdraft only |
| Warehouse rent | area × rate per square metre per month × number of months |
| Bonded warehouse | holds imported goods until customs duty is paid |
| Subrogation | after paying, the insurer takes over the insured’s rights in the damaged property |
Watch out
- Paying the full sum insured when the loss is smaller: indemnity pays only the actual loss.
- Calling life insurance a contract of indemnity.
- Charging overdraft interest on the whole amount withdrawn instead of only on the excess over the balance.
Worked example
A warehouse insured for ₹1,800,000 catches fire, and stock worth ₹1,290,000 is destroyed. (a) How much is the claim under indemnity? (b) What must the owner do while the fire burns, and which principle is this? (c) After paying, the insurer takes the damaged stock. Name this principle.
Working: the insurer pays the actual loss, up to the sum insured
Answer: (a) ₹1,290,000 (b) try to save as much as possible: mitigation of loss (c) subrogation
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