This document discusses the importance of utmost good faith in insurance contracts. It defines insurance as compensation for potential future losses in exchange for periodic payments. It states that utmost good faith, or full disclosure, is expected from both the insured and insurer regarding all facts related to the insurance contract and risk. Both parties have a duty to disclose material facts. Failure to disclose or providing misleading information breaks the trust and violates utmost good faith, allowing the insurer to void the contract and end their liability. Specific facts that must be disclosed for life insurance are also outlined.

1. BANKING and
INSURANCE
IMPORTANCE OF UTMOST GOOD FAITH IN INSUARANCE
Sanket Pawale
SYBBA
103

2. WHAT IS INSURANCE
A promise of
compensation for specific
potential future
losses in exchange for
a periodic payment

3. Utmost Good Faith
• In insurance disclosure of the true facts is
necessary ,so Utmost good faith is expected
from the insured and the insurer.
• Good faith basically means that their should
exist trust and honesty between the parties.
• Every facts related to the insurance contract
should be fully disclosed.

4. Utmost good faith
• The liability of utmost good faith lies on both the parties i.e.
Insured and insurer.
• The insured’s duty is to inform or disclose all the facts related
to the risk to be covered.
• Similarly it’s the duty of the insurer to make the insured aware
of all the terms and conditions of the contract.

5. Facts
• Facts which are immaterial earlier but becomes
material later on must be informed to the insurer
because such facts may increase the risk.
• The facts which increases the risk of the
insured (person or property) must be disclosed fully.
• All the other policies or contract in existence with
other policies or contract.
• The subject matter must be stated properly.
• The insurable
interest of the person for the
property should be disclosed

6. Life insurance
• It is duty to give fact material
to risk ,weather asked or not. It
is important in life insurance
because in that the subject
matter is invisible.

7. Facts to be disclosed in life insurance
• The true age should be disclosed by the insured
because less age results into less risk and less
premium.
• The person should disclose his true occupation
because working at chemical industries or coal
mines is
risky so high premium is charged.
• Where the person resides i.e. residence
(highway , near chemical industry or outskirt )

8. Facts to be disclosed in life insurance
• Insured should disclose his real
income.
• Lifestyle – Habits of the person , wants
of the person.
• Family history of the insured should be
disclosed.

9. Facts to be disclosed
voluntarily
• The facts which diminishes the risk
• The facts of common awareness.
• The facts which are known to every
body or can be known in ordinary
circumstances
• Facts waved by the insurance
company.
• Irrelevant information.

10. Violation Of Utmost Good
faith
• The breach of the utmost good faith occurs
when the trust is broken.
• When the insurer comes to know that the
hidden or non disclosed facts.
• Consequences
• The insurance policy becomes void.
• The insurer’s liability comes to
• The premium may increase.
an end.

11. Thank you