@#.Principles of insurance
Ans: The special contract of insurance involves principle they are: -
1. Insurable interest: For an insurance contract to be valid, the insured must process an insurable interest in the subject matter of insurance. The insurable interest is the pecuniary interest whereby the policy – holder is benefited by the existence of the subject – matter and is prejudiced by the death or damage of the subject matter.
2. Utmost good faith: The important principle ‘Utmost good faith’ which applies to all forms of insurance. Both parties of the insurance contract must be of the same mind at the time of contract.
3. Indemnity: As rule all insurance contract except personal insurance are contracts of indemnity. According to this principle the insurer undertakes to put the insured in the event of loss in the same position that the occupied immediately before the happening of the event insured against.
4. Subrogation: The doctrine of subrogation refers to the right of the insurer to stand in the place of the insured, after settlement of a claim in so far as the insured’s right of recovery from an alternative source of involved.
5. Proximate causes: The efficient cause of a loss is called the proximate cause of the loss. For the policy to cover the loss must have an insured peril as the proximate cause of the loss or also the insured peril must occur in the chain of causation that links the proximate cause with the loss. The proximate cause is not necessarily, the cause that was nearest to the damage either in time or in place, but is rather cause that was actually responsible for loss.
6. Contribution: If any properties are taken insurance more than one insurance company. In this situation every insurance company pay the claim amount against the committed ratio of contribution. The principle of contribution is the payment of all insurance company is basis on the ratio chart which amount is pay to the insured.
@#: Essentials of insurable interest.
Ans: The following are the essential of insurable interest –
1. There must be property, rights, interest, life, limb or potential liability developing upon the insured capable of being covered by a policy of insurance.
2. Such property, rights, life, limb, interest or liability must be the subject matter of insurance.
3. The insured must bear such relationship, recognized by law, to that subject matter of insurance whereby he benefits by the safety of that subject matter and is prejudiced by the loss, damage or destruction thereof.
When a person fulfils the above criteria or when a person has such a relationship with the subject matter, it is said that he has insurable interest and it is only then that he can insure.
@#: When insurable interest must exist.
Ans: The question as to when insurable interest must exist varies depending on the type insurance. The position is as follows: -
1. Life: Insurable interest must exist at the time of affecting the policy and it may not exist at the time of claim.
2. Marine: Insurable interest must exist at the time of claim although it need not exist at the time of affecting the policy. However, at the time affecting the policy the insured must prove that he going acquire insurable interest soon.
3. Fire: Insurable interest must exist both at the time of affecting the policy and at the time of claim.
4. Accident: Like fire, insurable interest must exist both at the time of affecting the policy and at the time of claim.
#. What is indemnity? What are the conditions for indemnity principle?
Ans: Indemnity: As a rule all insurance contract except personal insurance are contract of indemnity. According to this principle, the insurance company pays compensation against any kinds of loss which are present in the insurance contract. In certain form of insurance the principle of indemnity is modified to apply. The whole life insurance policy the insurer gives insurance claim after death of the insured and the insurance policy after complete the term, the insurance company pay the compensation causes of principle of indemnity the general people take the insurance policy.
Condition for indemnity principle:
1. The insured has to proof that he will suffer for loss on the insured matter at the time of the event and the loss is actual monetary loss.
2. Compensation amount must not be more than the amount insured.
3. If the insured gets more amount than the actual loss the insurer has right to get the extra amount back.
4. If the insured gets some amount from third party after fulfill indemnified by insurer, the insurer will have right to receive the entire mount paid by the third party.
@#. What is Subrogation? Ans: The most common form of subrogation is when an insurance company pays a claim caused by the negligence of another. Subrogation occurs when an insurance company that has paid off its injured client takes the legal rights the client has again a third party that caused the injury and sues that third party. Under property insurance, if the whole property become loss and the insurance company pay all kind of payment or cover the loss the remaining proof of the property are the actual owner become the insurance company and the transfer process is the doctrine of subrogation.
@#. Essentials of Doctrine of subrogation.
1. Corollary to the principle of indemnity: The doctrine of subrogation is the supplementary principle of indemnity. The latter doctrine says that only the actual value of the loss of the property is compensated, so the former follows that if the damaged property has any value left, or any right against a third party the insurer can subrogate the left property or right of the property if the insured is allowed to retain, he shall have realized more than the actual loss, which is contrary to principle of indemnity.
2. Subrogation is the substitution: The insurer, according to this principle, becomes entitled to all the rights of insured subject – matter after payment because he has paid the actual loss of the property. He is substituted in place of other persons who act on the right and claim of the property insured.
3. Subrogation only up to the amount of payment: The insurer is subrogated all the rights, claims, remedies and securities of the damaged insured property after indemnification but he is entitled to get these benefits only to the extent of his payment.
4. The subrogation may be applied before payment: If the assured got certain compensation form third party before being fully indemnified by the insurer, the insurer can pay only the balance of the loss.
5. Personal insurance: The doctrine of subrogation does not apply to personal insurance because the doctrine of indemnity is not applicable to such insurance.
@#. How subrogation arises?
Ans: Subrogation arises in the following ways:
1. Under tort: This is a wrong doing to another. In other words it is a breach at duty owed to third party. A person can not do wrong to another thereby causing damage to another’s property or inflicting injury to the person at that another.
2. Under contract: A contract may put some obligation on the person making breach of the contract to compensate the person who has been learn aggrieved as result breach. As for example:-contract of bailment.
3. Under statute: Statues may also create liability, for making compensation, arising out of a breach thereof. Examples are, factories act, occupies liability act. The riot act, carriage of goods by sea act etc.
@#. What facts need not be disclosed in Utmost good faith?
Ans: Facts need not be by the insured.
The following facts, however, are not required to be disclosed by the insured –
1. Facts which tend to lessen the risk.
2. Facts of public knowledge.
3. Facts which could be inferred from the information disclosed.
4. Facts waived by the insurer.
5. Facts governed by the conditions of the policy.
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