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9 views

t-5

Uploaded by

DEEPANSHU JHA
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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CONCEPT OF INSURANCE

• In legal sense, an insurance may be defined as a contract (in a form of policy)


between two parties-
• the insurance company (called Insurer), and an individual (called Insured),
• wherein the insurer promises to indemnify for financial losses
• The ‘insurer’ and ‘insured’are also known as ‘assurer’ and ‘assured’
• Insurance is a risk transfer mechanism in which an individual transfers his or
her risk to an insurance company in exchange for financial protection against
unforeseen events.
• the amount paid for this arrangement is known as the premium.
• Finally, it is critical to safeguard what is "important" to you.
• At a very basic level, it is some form of protection from any possible financial
losses.
• There are numerous kinds of insurance products available in the market such
as life insurance, health insurance, accident insurance, term insurance,
retirement plan, vehicle insurance, property insurance, etc

PRINCIPLES OF INSURANCE
• (1) Good faith-
• This principle states that both parties in an insurance contract must act in good
faith toward each other, which means they must provide clear and concise
information about the contract's terms and conditions.
• This principle signifies full disclosure or maximum truth to each party from
each other. The absence of this principle makes the insurance contract
voidable.
(2) Principle of Proximate Cause:-
• The doctrine of proximate cause is based on the cause-and-effect principle
• Proximal Causation is a claim if the insured object experiences an accident.
The insurance company will find out the main cause of the accident.
• the insurance company will decide to determine the number of claims
received by the policyholder.
(3) Principle of Insurable Interest:-
• The insured person must have an insurable interest in the subject matter.
• The term "insurable interest" refers to a subject that, if a specific event
occurs, significantly alters the insured's position; but, if the specific event
does not occur, the insured stays in the same position
• An individual cannot buy a life insurance policy for a person on whom he/she
has no insurable interest
(4) Principle of Subrogation (Assignment of Rights or Trust)
• Subrogation in insurance is a legal right of the insurance company to legally
pursue a third-party responsible for the damages/insurance loss caused to the
insured
• Example - If the goods kept in the factory of the insured gets destroyed by fire,
due to negligence of the electric company (third party). The insurance company
(insurer) will compensate to the insured for the losses caused by the fire and
may also sue the electric company to recover the amount of loss paid to the
insured.
(5)Principle of Indemnity
• Indemnity is the value of the loss to be paid by the insurance company, where
the value must not exceed the value of the loss incurred.
• According to this principle, the insured will only be completely compensated
for their actual losses.
• the insured is not entitled to make a profit from the loss suffered.
• The indemnification principle's goal is to put the insured back in the same
financial situation he was in prior to the loss happening.
(6) Principle of Contribution
• When an insured person purchases multiple insurance policies covering the
same risk, the contribution principle is in effect.
• One insurance company has the right to contact other insurance companies
to request a comparable amount if it has made the full payment.
• A property worth Rs. 5 lakhs are insured for Rs. 3 lakhs with Company A and
Rs. 1 lakh with Company B. In the event of property damage worth 3 lakhs,
the owner can claim the full amount from Company A but not from Company
B. Company A can now claim the proportional amount reimbursed from
Company B.
(6) Principle of Loss Minimization
• According to this principle, the insurer is obligated as an owner to take the
necessary steps to minimize the loss to the insured property. The principle
forbids the owner from being
• If a fire breaks out in your factory, you must take reasonable measures to
put it out. You can't just sit back and let the fire destroy the factory because
you know the insurance company will cover it

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