Question

sanjana insured her factory for 5 lakh against fire. due to fire she suffered a loss of 2 lakh. how much amount she can recover from the insurance company? why?

Answer 1

Answer:

Sanjana will recover Rs 2 lakh from the insurance company according to the ‘principle of indemnity’.

Explanation:

Principle of indemnity is to return the insurer back the amount, where the person was before the loss during the fire. It takes into an account the ‘depreciation cost’.

The insurer gets neither more nor less than the actual amount that was insured, hence she suffered an amount of 2 lakhs so gets compensated for that amount. The main idea here is to compensate the person and not make a profit from it.