Q.Explain the meaning and purpose of

These three specialised covers protect against dishonesty, crop failure and non-payment respectively.

(i) Fidelity insurance (fidelity guarantee insurance). A contract in which the insurer agrees to compensate an employer for financial loss caused by the dishonesty, fraud, embezzlement or misappropriation of an employee who holds a position of trust (cashier, storekeeper, accountant).

• Purpose: to protect the employer against loss from the dishonest acts of persons entrusted with money or goods; the insurer, after paying, can recover from the guilty employee. Widely used by banks and businesses.

(ii) Crop insurance. A contract that protects a farmer against loss of, or damage to, his crop caused by natural calamities beyond his control — drought, flood, excessive rain, pests, disease or hailstorm.

• Purpose: to give the cultivator financial security so a single bad season does not ruin him, and to encourage investment in better farming. Being vital to the country, it is largely promoted through government schemes and often settled on an area-yield basis rather than field by field.

(iii) Credit insurance. A contract in which the insurer protects a seller (creditor) against the risk of loss from a buyer's failure to pay for goods sold on credit — that is, against bad debts from a debtor's insolvency or protracted default. …

Students sometimes think fidelity insurance protects the employee — it protects the employer against the employee's dishonesty. Do not confuse credit insurance (against a b …