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Insurance and Contracts

This document discusses key concepts related to insurance. It defines insurance and outlines its benefits to businesses, the public, countries, and governments. It also defines important insurance terms like insurer, insured, insurable interest, and indemnity. The document discusses different types of insurance like life, marine, and fire insurance. It explains principles of insurance such as insurable interest, indemnity, subrogation, contribution, proximate cause, and mitigation of loss. Examples are provided to illustrate insurance concepts and principles.

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abhishek ladhani
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41 views26 pages

Insurance and Contracts

This document discusses key concepts related to insurance. It defines insurance and outlines its benefits to businesses, the public, countries, and governments. It also defines important insurance terms like insurer, insured, insurable interest, and indemnity. The document discusses different types of insurance like life, marine, and fire insurance. It explains principles of insurance such as insurable interest, indemnity, subrogation, contribution, proximate cause, and mitigation of loss. Examples are provided to illustrate insurance concepts and principles.

Uploaded by

abhishek ladhani
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Insurance

Dr. Anurag Tiwari


SIBM Nagpur
DEFINITION

 “Insurance is a device for the transfer of risks of individual entities to an insurer, who
agrees for a consideration(called premium) to assume to a specified extent of losses
suffered by the insured”.
Risk Insurance
BENEFIT TO
BUSINESSMEN

Financial
Assistance

Increase Insurance
Business of Key
efficiency employees

Help in
Production
continuity
against
of
risks
operations
Risk Insurance
BENEFIT TO
PUBLIC

Protection

Financial
Saving
Aid

Provision
Tax Releif
for old age
Risk Insurance
BENEFIT TO
COUNTRY

Mobilization
of Saving

Economic
Employment
Growth

Rural
Development
Risk Insurance
BENEFIT TO
GOVERNMENT

Investment in
Priority Sector
Transport,
Mining

EARN FOREIGN EXCHANGE PAY TAX TO GOVERNMENT


BY SETTIN GBRANCHES IN ON THEIR INCOME
FOREIGN COUNTRIES
IMPORTANT WORDS USED IN
INSURANCE
 INSURER: A person or company that underwrites an insurance risk; the party in an
insurance contract undertaking to pay compensation.
 INSURED: A person or organization covered by insurance.
 INSURABLE INTEREST: Financial interest of the insured in the subject matter of
insurance. a person must be in such a position that he will suffer a primary loss by the
happening of the event insured against.
 INDEMNITY: Promise to compensate in case of loss
Elements of Insurance Conrtact
 The Insured must have insurable interest in the subject of insurance
 The insurer’s obligation to indemnify
 The insurer assumes the risks of loss.
 As a consideration insured or policy holder to pay a premium to the insurance company
Principles of Insurance:

 It is the legal duty of the proposer(one who wants the insurance policy) to
disclose all the material facts about the subject to be insured.
 The premiums is fixed on the basis of the information supplied by the proposer.
EXAMPLE

 John took a health insurance policy.


 At the time of taking policy, he was a smoker and he didn't disclose this fact.
 He got cancer.
 Insurance company won't pay anything as John didn't reveal the important facts.
Principles of Insurance: Insurable interest

 Financial interest of the insured in the subject matter of insurance


 A person must be in such a position that he will suffer a primary loss by the happening of
the event insured against
 Insurable interest exists when an insured person derives a financial or other kind of benefit
from the continuous existence, without impairment or damage, of the insured object (or in
the case of a person, their continued survival).
 A person has an insurable interest in something when loss of or damage to that thing would
cause the person to suffer a financial or other kind of loss.
Example

 The following have been held to have an insurable interest:


 A Child has an insurable interest in the life of his father
 A creditor has an insurable interest in the life of debtor to the extent of the debt.
 A partner in business has an insurable interest in the life or lives of his co-partners.
Types of Insurance

 Insurance cover various types of risks:


 Life Insurance
 Marine Insurance
 Fire Insurance
 Miscellaneous Insurance
Life Insurance

 We can define life Insurance as a contract in which insured person pays regular premium to
the insurer and on the death of insured or at the maturity period, the insurance companies
pay the compensation or the matured sum respectively.
Marine Insurance

 It is not life insurance which first into existence


 This insurance is done by business house for safety delivery of goods while transporting
goods from one place to another by sea way, land way or air way accident may occur in
transit period causing loss or damage to goods or vehicle .
 To recover such loss marine insurance is done.
Fire Insurance

 An insurance against damage created from the fire is called fire insurance.
 Such insurance compensate the damage of house , machine , equipment , goods thing and
other immovable properties of the insured from the risks of the fire.
Principles of Insurance:

 Insurable interest:
 In case of life insurance spouse and dependents have insurable interest in the life of a
person. Corporations also have insurable interests in the life of it's employees.
 In case of life or marine insurance, insured must be the owner both at the time of entering
of entering into the insurance contract and at the time of accident.
Principles of Insurance:
 Indemnity :
 It is the promise to compensate in the case of loss.
 The insured is entitled to recover from the insurer only the amount of loss actually suffered
 He can not make any profit .
Principles of Insurance:

 Doctrine of Subrogation
 The principle under which an insurer that has paid a loss under an insurance policy is
entitled to all the rights and remedies belonging to the insured against a third party with
respect to any loss covered by policy.
EXAMPLE

 Doctrine of Subrogation:
 When an insured driver's car is totaled through the fault of another driver. The insurance
carrier reimburses the covered driver under the terms of the policy, and then pursues legal
action against the driver at fault.
 Suppose a house is insured for 2 lakh against fire. The house got damaged by fire and the
insurer pays the full value of 2 lakh to the insured. Later, the damaged house is sold for
Rs20,000. the insurer is entitled to receive the sum of subrogation.
EXAMPLE
 Doctrine of Subrogation

The insurer is
subrogated to the rights
only after he has
compensated

The insurer
must exercise
Insured must be
the rights in the
same person
name of the
insured

The insurer can get the benefit to


the extent of the amount he has
paid as compensation to the
insured
Principles of Insurance:

 Contribution
 Right of an insurer who had paid claim under an insurance policy to call upon other
insurers to contribute to the payment.
 It is applied when an insured has taken more than one policy on the same property
Contribution

 The amount which each insurer has to contribute to the cost of a loss when the
loss is covered by two or more insurers.
PROXIMATE CAUSE

The insurer is liable Only the immediate


Persil and not the cause and not the
expected or uninsured remote is to be taken
perils into notice
Principles of Insurance: Mitigation of Loss

 This principle states that the insured must take all the necessary steps to minimize the
losses to insured assets.
 For Example- Ram took insurance policy for his house .
 In an cylinder blast, his house burnt,
 He should have called nearest fire station so that the loss could be minimized

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