3. Insurance is a
protection against
financial loss arising
on the happening of
an unexpected event.
Insurance companies
collect premiums to
provide for this
protection.
A loss is paid out of
the premiums
collected from the
insuring public.
Insurance Companies
act as trustees to the
amount collected
4. 4
Insurance is a
contract between 2
parties.
On party called the
insurer who
undertakes for a fixed
amount called
premium
.
To pay the other
party called the
insured a fixed
amount of money on
the happening of an
certain event
.
5. Fundamental Principles of Insurance
Utmost good faith Insurable interest Indemnity
Subrogation Contribution Proximate cause
6. Utmost Good Faith
Insured has a legal duty to
disclose all information about
the proposed contract of
insurance to the insurers
whether such information is
requested or not.
7. Utmost Good Faith
Insured has a legal duty to disclose all information
about the proposed contract of insurance to the
insurers whether such information is requested or
not.
Fire Insurance –
Construction,
Occupancy,
Stock – nature of
goods
Motor Insurance –
Cubic Capacity ,
year of manufacture,
tonnage, purpose
etc.
8. It constitutes the legal rights to
insure arising out of a financial
relationship, recognized as law
between the insured and the
subject matter of insurance
Ownership of property Ownership of property Our own life
Insurable Interest
9. Fnancial compensation
sufficient to place the
insured in the same
financial position after a
loss as he enjoyed
Repair Reinstatement Replacement Money Transfer
Indemnity
10. Subrogation
This is defined as the
transfer of rights and
remedies of the
insured to the insurer
who has indemnified
the insured in respect
of the loss
Letter of subrogation
Ex : Vehicle theft claim
11. Contribution
An insured may have several insurances on the same subject matter. If he
recovers his loss under all these insurances, he will obviously make a profit
out of the loss.
The right of insurers who have paid a loss under a policy to recover a
proportionate amount from other insurers who are liable for the same loss.
The common law principle allows the insured to recover his full loss within
the sum insured from any insurers he likes.
12. Proximate Cause
It means the active efficient cause
that sets in motion a train of events
which brings about a result, without
the intervention of any force started
and working actively from a new and
independent source.
A person insured under personal
accident policy went out hunting
and met with an accident. Due to
shock and weakness he was unable
to walk. From the wet ground he
contracted cold which developed
into pneumonia which caused his
death. The proximate cause of death
was the original accident and
pneumonia is only a remote cause
and hence the claim is payable.
