Course code: FIN 1205

Instructed by: This slide is Created By Group G:

Head of The Department List of members:
Dr. Md. Nur Alam Siddik 1. 1920051 Monirul Islam
2. 1920052 Md Shan Zid Hasan
Associate Professor of 3. 1920053 Jahirul Islam Joy
Begum Rokeya University of 4. 1920054 Munna Hossain
Rangpur. 5. 1920056 Md Abdullah-Al-Jiyad
6. 1920055 Md Khairul Isam
7. 1920057 MehediHasan(absent)
 Insurance Definition
Insurance is a contract whereby, in return for the
payment of premium by the insured, the insurers pay the
financial losses suffered by the insured as a result of the
occurrence of unforeseen events.
 Risk
• Risk is the chance something harmful or unexpected
could happen. For i.e. A factory catching fire, a ship
sinking etc.
 Principles of Insurance

› Utmost Good Faith

› Indemnity
› Subrogation
› Contribution
› Insurable Interest
› Contribution
› Causa Proxima
 Utmost Good Faith
 Good faith- Let the buyer beware

 Declaration of all material Information about

the subject mater of insurance
Material Information is that information which enables the insurer to
decide:
a. whether he will accept the risk and
b. if so, at what rate of premium and subject to what terms and
conditions.
 Indemnity
Indemnity means security, protection and
compensation given against damage, loss or
injury.
According to the principle of indemnity, an insurance contract is signed
only for getting protection against unpredicted financial losses arising
due to future uncertainties. Insurance contract is not made for making
profit else its sole purpose is to give compensation in case of any
damage or loss.
• Applicability:
o When the losses suffered by the insured can be measured in terms of
money
o It is practicable to place the insured in the same financial position which
he occupied before the loss
 Subrogation
 Transfer of rights and remedies from the insured to the
insurer who has indemnified the insured in respect of the
loss.
 Contribution
It applies to all contracts of indemnity, if the
insured has taken out more than one policy on the
same subject matter.
• For example :- Mr. X insures his property worth
TK.100,000 with two insurers “Deltalife Ltd.” for TK.
90,000 and "MetLife BD Ltd." for TK. 60,000.
• Mr. X's actual property destroyed is worth TK. 60,000,
then Mr. X can claim the full loss of TK. 60,000 either
from Deltalife Ltd or MetLife BD Ltd., or he can claim
TK. 36,000 from Deltalife Ltd. and TK. 24,000 from
Metlife BD Ltd.
 Insurable Interest
Insurable interest states that the person getting insured
must have insurable interest in the object of insurance. In
simple words, the insured person must suffer some financial loss by
the damage of the insured object.
 Causa Proxima
… means when a loss is caused by
more than one causes, the
proximate or the nearest or the
closest cause should be taken into
consideration to decide the liability
of the insurer.
For example :- A cargo ship's base was
punctured due to rats and so sea water
entered and cargo was damaged.
Here there are two causes for the damage
of the cargo ship - (i) The cargo ship
getting punctured because of rats, and (ii)
The sea water entering ship through
puncture. The risk of sea water is insured
but the first cause is not. The nearest
cause of damage is sea water which is
insured and therefore the insurer must pay
the compensation.
However, in case of life insurance, the
principle of Causa Proxima does not
apply. Whatever may be the reason of
death (whether a natural death or an
unnatural death) the insurer is liable to
pay the amount of insurance.