Question

23.Rahul had taken insurance of ` 3 lac for his car (worth ` 2 lac)
from an insurance company. After 2 month, his car caught fire
and got damaged severely. His car was taken by insurance
company and insurance amount was paid to the Rahul. (3)
(i) How much amount was given by the insurance company
to Rahul?
(ii) According to which principle of insurance did the insurance
company take his damaged car?​

Answer 1

Answer:

I) Rahul was paid 2lac

ii) Principle of subrogation

Explanation:

i) Principle of indemnity states that insurance is not meant for making profits. It aims to bring back the insurer to the same position that he/ she was before the event. As such, since the car was worth 2 lac before the accident, Rahul will be paid 2 lac only.

ii) According to the principle of subrogation, when the insured is compensated for the losses due to damage to his insured property, then the ownership right of such property shifts to the insurer.