Insurance

Meaning of Insurance
• Insurance is a contract in which one party
known as the insurance or assured, insures
with another person, known as the insurer,
assurer or underwriter, his property or life, or
the life of another person in whom he has a
pecuniary interest, or property in which he is
interested, or against some risk or liability, by
paying a sum of money as the premium.
 Essential Elements of Insurance
Contracts
• The insurance is really subject to a risk otherwise
it will amount to betting .
• The time and occurrence of risk must involve
some uncertainty.
• Both the insurer and the insured should not have
any control over the happening of the event
insured against.
• The cost of insurance should not be prohibitive.
• The risk must be capable of approximate
mathematical estimation.
 Principal of Insurance
• Good Faith
• Insurable Interest
• Indemnity
• Mitigation of loss
• Attachment of risk
• Cause proxima
 Good Faith
• A contract based on utmost good faith and if the
utmost good faith is not observed by either party
the contract may be avoided by the other.
• Insurance shifts risks from one party to another it
is essential that there must be the utmost good
faith and frankness between the insured and
insurer, the whole truth must be told about the
subject matter of insurance and all circumstances
surrounding it, in order that the underwriter may
know the extend of his risk and how must he
must charge for the insurance of it.
 Insurable Interest
• The second principle is that the assured must
have an actual interest called the insurable
interest, in the subject matter of the insurance
either he must own part or whole of it, or he
must be in such a position that injury to it
would affect his adversely.
 Indemnity
• The third fundamental principle is that
excepting life assurance and personal accident
and sickness insurance, a contract of
insurance contained in a fire, marine, burglary
or any other policy is a contract of indemnity.
This means that the assured in the case of loss
against which the policy has been made shall
be fully indemnified by never more than fully
indemnified.
 Mitigation of Loss
• In the event of some mishap to the insured
property, the owner must act as though he
were uninsured, and make every effort to
preserve his property.
 Risk Must Attach
• The next principle is that a contract of
insurance can be enforced only if the risk has
attached. If the risk is not run the
consideration fails, and therefore the
premium received by the insurer must be
returned.
 Causa Proxima
• Every loss that clearly and proximately results,
whether directly or indirectly, from the event
insured against is within the policy.
 Contract of Insurance
• Premium
• Days of Grace
• Return of Premium
• Policy
• Interim Receipt, Certificate or Cover Note
 Premium
• The Premium is the price for the risk
undertaken by the insurer. It is the
consideration for the insurance.
• The rate of premium is based upon the
average of losses as compared with profits.
• The amount of the premium may not always
be a fixed sum, for it may be arranged to vary
according to the changes in the risk at any
time.
 Days of Grace
• The days of grace are the days allowed by the
insurance company after the expiry of the
stipulated period of insurance during which the
assured can pay the premium in order to
continue or to renew the policy of insurance.
• In insurances where the insurer reserves the
option to renew the risk, the insured is not
covered during the days of grace if the renewal
premiums remain unpaid before it is tendered
and accepted.
 Return of Premium
• Premium is the consideration for the risk run
by the insurers, and if the risk insured against
is not run, then the consideration fails, the
policy does not attach, and as a consequences
the premium paid can be recovered from the
insurers.
 Policy
• The policy is a formal and enforceable stamped
document signed and issued by the insurance
company embodying the terms of the contract
between the parties.
• The articles of association of every insurance
company usually provide the mode in which the
company is to be bound, and policies must be
issued in accordance with the provisions
contained therein, before the assured can sue on
the insurance.
• Re-Insurance- If an insurance company finds
that it has entered into an insurance contract
which is an expensive proposition for it or if it
wishes to minimize the chances of any
possible loss, without at the same time giving
up the contract, it will re insure a portion of
the risk with some other insurance company
or companies. This is knows as re insurance.
• Double Insurance- When the same subject-
matter is insured with two or more insurers
and the total sum insured exceeds the actual
value of the subject matter it is known as
double insurance and it amounts to over
insurance.
 Types of Insurance
• Marine Insurance
• Fire Insurance
• Life Insurance
 Marine Insurance
• A contract of marine insurance is an
agreement whereby the insurer undertakes to
indemnify the assured, in the manner and to
the extent there by agreed, against marine
losses, that is to say, the losses incidental to
marine adventure.
 The Policy
• The name of the assured or of some person
who effects the insurance on his behalf
• The subject matter insured and the risk
insured against
• The voyage, or period of time, or both as the
case may be covered by the insurance
• The sum or sums insured
• The name or names of the insurer or insurers.
 Types of Policies
• Voyage Policy
• Time Policy
• Valued Policy
• Unvalued Policy
• Floating Policy
 Fire Insurance
• A fire insurance is a contract to indemnify the
insured for destruction of or damage to
property caused by fire. The insurer
undertakes to pay the amount of the assured
loss not in excess of the maximum amount
stated in the policy.
 Average Clause
• It is becoming very common in policies of fire
insurance to insert a condition called the
average clause. By which the insured is called
upon to bear a portion of loss.