Distinguish between a contract of indemnity and a contract of guarantee.
Answers
Contract of indemnity - All insurances accept Life Insurance are the contract of indemnity. According to this, it is not a contract of profit the purpose of insurance is to bring back the insured in the same financial condition as he was before the loss. to claim the compensation insured must suffer the damage or loss. in the contract of indemnity the compensation is paid only on the happening of the event.
For example, Abhishek insured his factory for rupees 200000 against fire due to fire he suffered a loss of Rupees 1 lakhs then the insurance company will compensate him rupees 100000 only and not the policy amount that is rupees 200000 because insurance is a contract for compensating the loss not-for-profit.
Contract of guarantee - Assurance is a contract of guarantee It refers to contract in which the sum assured is bond to be paid Sooner Or Later, however in case of insurance the sum insured is paid only when insured suffers a particular loss. the term guarantee is used when dress is certain and is bound to happen. In assurance the compensation is paid whether the event happens or not.
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