explain briefly the principles of insurance with suitable examples
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Answer:
The specific principles of a valid insurance contract consist of the following
(i) Utmost Good Faith A contract of insurance is a contract of uberrimae fidei i.e., a contract found on utmost good faith. It is the duty of the insured to valuntarily make full, accrute disclosure of all facts, material to the risk being proposed and the insurer to make clear all the terms and conditions in the insurance contract.
For example, if any person has taken a life insurance policy by hiding the fact that he is a cancer patient and later on if he dies because of cancer then insurance company can refuse to pay the compensation as the fact was hidden by the insured.
(ii) Insurable Interest The insured must have an insurable interest in the subject matter of insurance. Insurable interest means some pecuniary interest in the subject matter of the insurance contract. The insured must have an interest in the preservation of the thing or life insured.
For example, if a person has taken the loan against the security of a factory premises then the lender can take fire insurance policy of that factory without being the owner of the factory because he has financial interest in the factory premises.
(iii) Indemnity According to it, the insurer undertakes to put the insured in the same position that he occupied immediately before the loss due to happening of the event insured against. The principle of indemnity is not applicable to life insurance.
For example, a person insured a car for 2.5 lakh against damage on an accident case. Due to accident he suffered a loss of 1.5 lakh, then the insurance company will compensate him 1.5 lakh only not the policy amount i.e., 2.5 lakh as the purpose behind it is to compensate not to make profit.
(iv) Contribution Under this principle, an insurer who has paid a claim under insurance has the
right to call upon other liable insurers to contribute for the loss of payment. .
For example, a person gets his house insured against fire for ? 1 lakh with insurer A and for 50,000 with insurer B. A loss of 75,000 occurred. Then A is liable to pay 50,000 and B is liable to pay 25,000.
When the loss is the result of two or more causes, the most proximate cause of the mishap should be taken into consideration. The insurance undertakes to compensate the insured for the loss caused to him or her due to damage of property insured. For example : Sugar send by Ship insured against sea hazards .
The 7 Principles of Insurance Contracts:
When You Need A Lawyer
When You Need A LawyerUtmost Good Faith.
When You Need A LawyerUtmost Good Faith.Insurable Interest.
When You Need A LawyerUtmost Good Faith.Insurable Interest.Proximate Cause.
When You Need A LawyerUtmost Good Faith.Insurable Interest.Proximate Cause.Indemnity.
When You Need A LawyerUtmost Good Faith.Insurable Interest.Proximate Cause.Indemnity.Subrogation.
When You Need A LawyerUtmost Good Faith.Insurable Interest.Proximate Cause.Indemnity.Subrogation.Contribution.
When You Need A LawyerUtmost Good Faith.Insurable Interest.Proximate Cause.Indemnity.Subrogation.Contribution.Loss Minimization.
Main principles of Insurance:
Main principles of Insurance: Contribution. Insurable Interest. Proximate Cause.
Primary Functions of Insurance
Primary Functions of InsuranceInsurance provides certainty.
Insurance provides certainty of payment at the uncertainty of loss. ...
Insurance provides certainty of payment at the uncertainty of loss. ... Insurance provides protection. ...
Insurance provides certainty of payment at the uncertainty of loss. ... Insurance provides protection. ... Risk-Sharing. ...
Insurance provides certainty of payment at the uncertainty of loss. ... Insurance provides protection. ... Risk-Sharing. ... Prevention of loss. ...
Insurance provides certainty of payment at the uncertainty of loss. ... Insurance provides protection. ... Risk-Sharing. ... Prevention of loss. ... It Provides Capital. ...
Insurance provides certainty of payment at the uncertainty of loss. ... Insurance provides protection. ... Risk-Sharing. ... Prevention of loss. ... It Provides Capital. ... It Improves Efficiency. ...
Insurance provides certainty of payment at the uncertainty of loss. ... Insurance provides protection. ... Risk-Sharing. ... Prevention of loss. ... It Provides Capital. ... It Improves Efficiency. ... It helps Economic Progress.