Nature of Insurance


* Payment on Contingency Payment is made on the occurrence of the contingency insured. The life insurance contract is a contract of certainty because the contingency, death or the expiry of term, will certainly occur. Here the payment is certain. But in other insurance contracts, the contingencies like fire or marine perils may or may not occur.So if the contingency occurs, payment is made, otherwise no amount is given to the policy holder

* Amount of payment

On the occurrence of the contingency, the insurer is legally bound to make good the financial loss suffered by the insured. The amount of payment depends upon the value of loss occurred due to the particular insured risk. In the case of life insurance, the insurer promises to pay a fixed sum on the happening of an event. But in general insurance, the amount as well as the happening of loss is required to be proved.

* Insurance is not charity

Charity is given without consideration, but insurance is not possible without premium.

* Insurance is not a gamble

If gambling events were insurable, the gambler would be put in the enviable position of being unable to lose. If it is ce company. Moreover, the gambler presumably y the premium needed for transferring the risk. Law head, he wins, else if it is tail, he collects the money from the insuran enjoys the risk of gambling, and therefore would be unlikely prohibits the use of insurance for gambling purposes because fraud and murder would increase and make the system fail In short, gambling can be distinguished from an insurance contract in the following ways:-

Gambling creates risk while insurance transfers an existing risk

Gambling deals with speculative risk, where there might be gains or losses,while insurance deals with pure risk where there is possibility of loss or no loss.

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