Professional Documents
Culture Documents
Basics & Principles of Insurance
Basics & Principles of Insurance
INTRODUCTION TO INSURANCE:
In the modern civilized world even after taking
proper
care at every step, life and property is continuously
exposed to loss or damage. A person moving on
road
can be killed by a car, a motor bike parked may be
stolen, a factory may be gutted, cargo may be
damaged while in transit by a ship ±what not - to
say
everything including life is exposed to risk and
there
is uncertainty every where despite taking necessary
BASICS OF INSURANCE
CONTRACT OF INSURANCE : It is an agreement
between the Insurers and the insured where by the
Insurers, in consideration of having received the
premium, undertake to make good the financial loss,
subject to the limit of a specified amount, suffered by
the insured as a result of loss or damage of the
insured property by specified perils during the stated
period.
BASICS OF INSURANCE
INSURANCE
RISK:
Uncertainty about a Loss.
PERIL :
Cause of Loss
HAZARD :
Conditions which may create or increase the
chance of loss arising from any peril.
INSURABLE RISK
RISK
¢ Insurable Interest
¢ Utmost Good faith
¢ Indemnity
¢ Subrogation and Contribution
¢ Proximate Cause
Object:
¢ Loss or damage must be made good in such a
manner that financially the insured should be
neither better off nor worse off as a result of loss.
¢ To place the insured in the same financial position
as he was before a loss.
¢ Prevent insured from making a profit out of a loss.
Methods :
¢ Cash Payment
¢ Repairs
¢ Replacement
¢ Reinstatement
Subrogation:
¢ Transfer of rights and remedies of insured to the
insurer who has indemnified the insured in respect
of the loss.
¢ This arises from the principle of indemnity.
Collecting claim as well as money/ goods from the
person responsible for loss will be against
indemnity principle.
Contribution :
¢ The right of an insurer who has paid a loss under a
policy to recover a proportionate amount from other
insurers who are liable for loss.
¢ Arises from the principle of indemnity as the
insured is prevented from claiming from all insurers
separately.
¢ The foll. are reqd.:
¢ Subject matter must be the same.
¢ Peril which causes the loss should be common to
all policies.
¢ Policies must be in force at the time of loss.
Pure Risk :
¢ Pure Risk always produce losses. In Pure risks,
there is no possibility of gain.
Speculative Risk:
¢ Speculative risks can result into a gain or loss.
Offer & Acceptance
Insured:
¢ Should have attained age of majority
¢ Is sound of mind
Insurer:
¢ Must have legal capacity to contract.
¢ Authorisation by the Government.
Legality of contract