Mention any three similarities between life insurance and non-life insuranced.
Answers
Answer:
Explanation
➢ Meaning of insurance-
• an arrangement by which a company or the state undertakes to provide a
guarantee of compensation for specified loss, damage, illness, or death in
return for payment of a specified premium.
• Insurance is a legal agreement between two parties i.e. the insurance company
(insurer) and the individual (insured). In this, the insurance company promises to
make good the losses of the insured on happening of the insured contingency.
❖ Different Types of insurance-
• Life insurance
• Health insurance
• Car insurance
• Home insurance
• Travel insurance
➢ Principles of insurance
1. Nature of contract:
Nature of contract is a fundamental principle of the insurance contract. An insurance contract
comes into existence when one party makes an offer or proposal of a contract and the other
party accepts the proposal. A contract should be simple to be a valid contract. The person
entering into a contract should enter with his free consent.
2. Principal of utmost good faith:
Under this insurance contract, both parties should have faith in each other. As a client, it is
the duty of the insured to disclose all the facts to the insurance company. Any fraud or
misrepresentation of facts can result in the cancellation of the contract.
3. Principle of Insurable interest:
Under this principle of insurance, the insured must have interest in the subject matter of the
insurance. The absence of insurance makes the contract null and void. If there is no insurable
interest, an insurance company will not issue a policy.
Insurable interest must exist at the time of the purchase of the insurance
For example, a creditor has an insurable interest in the life of a debtor, A person is
considered to have an unlimited interest in the life of their spouse etc.
4. Principle of indemnity:
Indemnity means security or compensation against loss or damage. The principle of
indemnity is such principle of insurance stating that an insured may not be
compensated by the insurance company in an amount exceeding the insured’s economic
loss. In the type of insurance, the insured would be compensated with the amount
equivalent to the actual loss and not the amount exceeding the loss.
5. Principal of subrogation:
The principle of subrogation enables the insured to claim the amount from the third
party responsible for the loss. It allows the insurer to pursue legal methods to recover
the amount of loss.
For example, if you get injured in a road accident, due to reckless driving of a third
party, the insurance company will compensate your loss and will also sue the third party
to recover the money paid as a claim.
6. Double insurance:
Double insurance denotes insurance of the same subject matter with two different
companies or with the same company under two different policies. Insurance is possible
in case of indemnity contracts like fire, marine, and property insurance.
7. Principle of proximate cause:
Proximate cause means the ‘nearest cause’ or ‘direct cause’. This principle is
applicable when the loss is the result of two or more causes. The proximate cause
means; the most dominant and most effective cause of loss is considered. This principle
is applicable when there are series of causes of damage or loss