Contract of Insurance, Insurance, Life Insurance, Fire Insurance, Marine Insurance, Types of Insurance

1. CONTRACT OF INSURANCE
The Contract of Insurance is a contract whereby a ‘person undertakes to indemnify
another against a loss arising on the happening of an event or by pay a sum of money
on the happening of an event. The person who insures is called “Insurer”. The person
who effects the insurance is called the “Insured” or “Assured”. The price for the risk
undertaken by the insurer and paid by the insured to the insurer is called “Premium” and
the document which contains the contract of insurance is called “Policy”.
Following are the general principles of contracts of insurance:
1. A contract of insurance is a contract uberrimae fider, i.e. a contract requiring
utmost good faith of the parties. So, all material facts which are likely to influence
the insurer in deciding the amount of premium payable by the insured must be
disclosed by the insured. Failure to disclose material facts renders the contract
voidable at the option of the insurer.
2. The assured must have, that is called “insurable interest” in the subject matter of
the contract of insurance. “He must be so situated with regard to the thing
insured that he would have benefit from its existence, loss from its destruction”.
3. Every contract of insurance such as life insurance and personal accident and
sickness insurance, is a contact of indemnity. So, the insurer pays the actual loss
suffered by the insured. He does not pay the specified amount unless this
amount is the actual loss to the insured.
4. The insured must take reasonable precautions to save the property, ion the event
of some mishap to the insured property. He must act as a prudent uninsured
person would act in his own case under similar circumstances to mitigate or
minimize losses.
5. The insurer must run the risk of indemnifying the insured. If he does not run the
risk, the consideration for which the premium is paid, fails and consequently, he
must return the premium paid by the insured.
6. The insurer is liable for loss which is proximately caused by the risk insured
against. The rule is “causa proxima non remota spectalur”, i.e. the proximate but
not the remote cause is to be looked to. So, the loss must be proximately caused
in order that the insurer is to become liable.
7. Except in the case of life insurance, every contract of insurance comes to an end
of the expiry of every year, unless the insured continues the same and pays the
premium before the expiry of the year.
8. According to the rule of subrogation when the loss is caused to the insured by
the conduct of third party, the insurer shall have to make good such loss and

2. them have a right to step into the shoes of the insured and bring an action
against such third party who caused the loss to the insured. This right of
subrogation is enforceable only when there is an assignment of cause of action
by the insured in favour of the insurer. The doctrine of subrogation does not
apply to life insurance.
there are different kinds of insurance. (1) Life (2) Fire (3) Marine (4) Accident and
(5) Guarantee insurance etc.
LIFE INSURANCE CONTRACT
Life insurance is popularly referred to as life assurance. In this case, the underwriter
agrees to pay the assured or his heirs, a certain sum of money on death or on the
happening of an event dependent upon human life in consideration of premiums paid by
the assured. It also grants disability and accident benefits annuities and super-annuation
allowances.
A life insurance policy is mainly to two types, (1) the whole life policy and (2) the
endowment policy. In the former one, the premiums have to be paid either for a
specified number of years or till the death of the assured. The policy matures on the
death of the assured. But in the case of the latter type, the amount assured is payable
either on the death of the assured or on the expiry of a specified number of years
whichever is earlier.
Again, a life insurance policy may be either, (1) with profits or (2) without profits. In the
case of the former policy, the assured gets not only the sum assured but also a share in
the profits of the underwriter in the form of bonus. But he has to pay more premium in
this case than that is payable in respect of “without profits” policy. But in the case of
“without profits” policy, the assured is not entitled to any share in the profits.
FIRE INSURANCE
A contract of fire, insurance is a contract whereby the insurer undertakes, in
consideration of the premium paid, to make good any loss or damage caused by fire
during a specific period. The contract specified the maximum amount which the assured
can claim in case of loss. This amount is fixed by the parties at the time of the contract.
It is, however, not the measure of the loss. The loss can be ascertained only after the
fire has occurred. The insurer is liable to make good the actual amount of loss nor
exceeding the maximum amount fixed by the parties.

3. CHARACTERISTICS OF FIRE INSURANCE CONTRACT
1. It is a contract of indemnity. The assured can, in the event of loss, recover the
actual amount of loss from the insurer. This is subject to the maximum amount
for which the subject-matter is insured.
2. It is a contract of uberrinate fider. The assured and the insurer have to disclose
everything which is in their knowledge and which will affect the contract of
insurance.
3. The assured must have insurable interest in the subject-matter both at the time of
insurance and at the time of loss. The insurable interest must be capable of
valuation in terms of money.
4. The risk covered by a fire insurance contract is the loss resulting from fire or
some cause which is the proximate cause of the loss.
5. It is subject to the principles of subrogation and contribution
6. It is contract from year to year. It comes to an end after the expiry of the year. It
can, however, be renewed if the assured pays the premium during the days of
grace.
TYPES OF FIRE POLICIES
1. Specific Policy
It is policy which covers the loss of the assured up to a specific amount which is
less than the real value of the property. Specific policy is a case of under-insurance
to check under-insurance, the insurers usually insert average clause in
the policy in which case the policy is known as average policy.
2. Comprehensive Policy
It is a policy which covers losses against fire, theft, burglary, third party risks, etc.
such a policy is also known as “all-in-one” policy. It may also cover loss of profits
during the period the business remains closed due to fire.
3. Valued Policy
It is a policy in which the amount payable in case of loss is fixed at the time the
policy is taken. In the event of loss, the fixed amount is payable irrespective of
the actual amount of loss. A valued policy can be legally challenged because it is
not a contract of indemnity.

4. 4. Floating Policy
It is a policy which covers property at different places against loss by fire. It
might, for example, cover goods lying in two warehouses at two different places.
It is always subject to average clause
5. Replacement or Reinstatement Policy
In order to prevent fraudulent devices by the assured, the insurers usually insert
a clause in the policy, called the re-instatement clause, whereby the insurer
undertakes to pay the cost of the replacement of the property damaged or
destroyed by fire.
MARINE INSURANCE
A contract of marine insurance is a contract whereby the insurer undertakes to
indemnify the insured, in manner and to the extent thereby agreed, against marine
losses, in consideration of a premium paid by the insured. It is a contract of indemnity. It
is a contract ‘uberrimae fider”. It must have insurable interest. The doctrine of
subrogation applies to it. The usual form of the policy is what i s called “Lloyd’s Policy”.
Lloyds are a registere body of several members and a broker is always employed in the
case of this policy. Sometimes, a company policy also may be issued.
KINDS OF MARINE POLICIES
1. Time Policy: It insures the subject matter for a certain specified period, not
exceeding twelve months.
2. Voyage Policy: It insures the subject-matter for a certain voyage only i.e.
journey from one fixed port to another fixed port.
3. Valued Policy: It specified the agreed value of the subject-manner insured.
Insurers are liable only for the loss not exceeding the value mentioned in the
policy.
4. Unvalued or Open Policy: It does not specify the value of the subject-matter.
The value is to be ascertained subsequently at the time of actual loss.
5. Mixed Policy: It insures the subject-matter for a specified voyage and for a
particular period.
6. Floating Policy: It describes the general terms of insurance, leaving other
particulars such as the name of the ship etc. to be declared subsequently.

5. 7. Wagering or Honour Policy: It is also known as “policy proof of interest” or
“Interest or no interest policy”. In this case, the insurer does not have insurable
interest in the subject-matter of the contract. It resembles a wages and hence
void Losses are indemnified depending on the honour of the insurer.
A marine insurance policy contains the following particulars:
1. Name of the ship
2. Name of the parties
3. The time of commencement and duration of the risk
4. “Lost or not lost” clause whereby the insurer is made liable whether the goods
were in existence or not at the time when the insurance was effected, except
when the insured knew that the goods were destroyed already.
5. “Touch and Stay” clause which mentions the various parts which the ship
touches and the period of its stay at these parts.
6. Accepted perils for which the insurer undertakes to be liable.
7. “Free from capture and seizure” clause which exonerates the insurer from has
liability for the loss arising out of the capture and seizure of the ship.
8. “Free from particular average” or “Free from all average” clause whereby the
insurer is exempted from his liability for any particular average loss or for all
average loss caused to the subject-matter of the contract.
9. “Barratry” clause relates to the liability of the insurer for the loss arising out of the
wrongful act of the master or any of the crew of the ship.
10. “Sue, Labour and Travel” clause which entitles the insured to minimize the loss
and claim for expenses from insurer and to recover the goods lost by falling
overboard accidentally.
11. “Collision or running down” clause whereby the owner of an insured ship shall
indemnify the owner of another ship if the former ship collides negligently with the
latter.
12. “Inchmaree” clause which protects the insured against any latent defect in the
machinery of the ship.
13. “Expected Perils” clause which specified the risks not covered by the insurance
policy.

6. A marine policy is thus a formal document signed by the insurer. It must be stamped.
It contains the terms of the insurance as explained above. It is an actionable
claim and can be transferred by means of an assignment.