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Question
"Insurance is a contract of indemnity." Explain.
Solution
- Insurance contracts require the insurer to pay the actual loss or the sum covered, whichever is less.
- Insurance aims to restore the insured's pre-loss situation.
- All insurance contracts, save for life insurance, are indemnity contracts.
- Life insurance does not follow the principle of indemnity (compensation).
- Human life cannot be valued in monetary terms.
- In life insurance, the money insured is always payable at death or the expiration of the set period, whichever occurs first.
- Only the payment time is unpredictable. That is why life insurance is referred to as life assurance.
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RELATED QUESTIONS
Choose the Correct Answer.
The basic principle of insurance is ________
______ means a promise to compensate in case of loss.
Assertion: The concept of insurable interest is fundamental to all insurance contracts.
Reasoning: It ensures that the insured has a legitimate financial interest in the subject matter insured.
Identify the principle of insurance based on the given information.
- The insured must be benefitted by the existence of the insured object and must suffer a loss by its destruction.
- It is the financial interest of the insured in the subject matter of insurance.
Explain in brief the Principle of Subrogation.
"The insurer undertakes to put the insured, in the event of loss, in the same position that he occupied before the event." Which principle of insurance is referred to in this statement?
What is insurable interest?
Distinguish between Principle of Indemnity and the Principle of Insurable Interest.
"Principle of contribution is a corollary to the principle of indemnity." Comment.
Is insurable interest necessary in all insurance contracts?
