Indemnity


All insurance contracts, except life and personal accident insurance, are based on the principle of indemnity It means that the insured will be paid only the actual amount bound of loss or the amount of the policy whichever is less. That is he will not be allowed to make a profit out of any damage to his property by taking an insurance policy. For eg. If a person has insured his goods for Rs. 20,000 against fire and if goods worth Rs. 15,000 are destroyed by fire, the insurance company need pay only Rs. 15,000/- ie. The actual value of the goods lost. Moreover, if the actual loss exceeds Rs. 20,000, then subject the insured will get only Rs. 20,000/. This is because if the insured has a chance to get an amount higher than the amount of loss there will be a temptation for him to destroy his property intentionally and thus secure a profit out of insurance.

However, in the case of life and accident insurances this principle of indemnity does not apply. The monetary loss caused by death or accident cannot be calculated, as value of human life cannot be measured in terms of money Therefore, the sum insured is paid in such events. 

Comments

Post a Comment

Popular posts from this blog

Insurable Interest

Image
In simple words, insurable interest means monetary Insurable Interest interest. No person can enter into a valid contract of insurance unless he has insurable interest in the subject matter of insurance. A person is said to have insurable interest in the subject matter, if he suffers financially, by its loss or destruction. Thus a person has insurable interest in his own life, in the life of his spouse or child or debtor. Similarly the owner of a property has an insurable interest in it. It is also important, to know the time at which the insurable interest must exist to execute a valid contract of insurance. It depends on the branch of insurance. In the case of life insurance, the insurable interest must exist at the time when the policy is taken. It may not be in existence at the time of the death of the person whose life is insured. For eg. A creditor can insure the life of his debtor to the extent of the debt. Even if the debtor dies after paying off the debt, the creditor ca...
Read more

Definition - Fire Insurance

Image
Definition A fire insurance may be defined as "a contract by which the insurer undertakes, for a money consideration, to indemnify the insured against the consequences of a fire during an agreed period upto the amount stated in the policy.'  According to V.R. Bhushan and Prof. R S. Sharma, a fire insurance may be defined as "an agreement whereby one party, in return for a consideration, undertakes to indemnify the other party against financial loss which he may sustain, by reason of certain defined subject-matter being damages or destroyed by fire or other defined perils upto an agreed amount." The main purpose of a fire insurance contract is to protect the insured against the loss of his property by fire. A fire insurance contract is a contract of indemnity. It indemnifies the insured against any loss caused by fire. To get compensation for loss of property under fire insurance, it must be proved that the loss of property has arisen due to fire. It is also...
Read more

Requirements as to Capital Structure and Voting Rights and Maintenance of Registers

Image
According to section 6A of the Insurance Act, 1938, the following provisions should be made with regard to the requirements as to capital structure and voting rights and maintenance of registers: 1 . A public company limited by shares having its registered office in India, shall carry on life insurance business only, if it satisfies all the following conditions, namely: i. that the capital of the company consists only of ordinary shares each of which has a single face value ii. that the paid-up amount is the same for all shares whether existing or new, except during any period not exceeding one year allowed by the company for payment of calls on shares; 2 . The voting right of every shareholder of any public company as aforesaid shall in all cases be strictly proportionate to the paid-up amount of the shares held by him. 3 . A public company which carries on life insurance business shall not issue any shares other than ordinary shares of the nature specified in sub-sectio...
Read more