Insurance is a cooperative way of spreading the loss by following the principle of pooling of risks.

Insurance can merely financially compensate for the effects of misfortune.

J J Maini

MIMIT, Malout

A contract b/w two parties whereby a person undertakes in consideration of a fixed sum to pay to the other a fixed amt of money on the happening of a certain event (death or attaining a certain age in case of human being) or to pay the amount of actual loss when it takes place through a risk insured (in case of property).
POLICY:- instrument containing the contract of insurance. INSURED OR ASSURED:- the person whose risk is insured INSURER OR ASSURER OR UNDERWRITER:- the person or company which the insures.

J J Maini

MIMIT, Malout

PREMIUM :- The consideration in return for which the insurer agrees to make good the loss.

SUBJECT-MATTER OF INSURANCE:- The thing or property which forms the basis of insurance INSURABLE INTEREST:- The interest of the assured in the subject-matter.
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1.

In a contract of insurance, there must exist an insurable interest, in a wagering contract the existence of insurable interest is not required.

2.

A contract of insurance is based on concept of indemnity,in wager there is no question of indemnity as no risk is covered.
A contract of insurance is based on good faith, in wager there is no such question.
J J Maini MIMIT, Malout 5

3.

4. 5.

6.

A contract of insurance is legally enforceable. The object of insurance contract is to protect against loss on happening of uncertain events,whereas wagering contract are entered to make speculative gains. Insurance contract is based on premiums calculated after assesing probability of loss by mathematical techniques.whereas wagering agreement is pure gambling involving no such calculations.
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The insurance act 1938 The life insurance corporation act 1956 The marine insurance act 1963 The general insurance business act 1972 The insurance regulatory and development authority(IRDA) act 1999.

J J Maini

MIMIT, Malout

Life insurance business. Non-life insurance business i.e. General insurance business i.e. fire, marine or miscellaneous business (crop, burglary, motor vehicles, bad debts etc.)

J J Maini

MIMIT, Malout

1.

2.

Aleatory Contract :- The contracting parties know that the amount to be paid by each party is not equal. In the insurance policy, the insured pays the amount of the premium. If he suffers loss he may receive a much larger amount from the company than he paid in premiums and if he suffers no loss, he will collect nothing. Utmost good faith:- The insured is bound to disclose all material facts known to him but unknown to the insurer .
J J Maini MIMIT, Malout 9

3. 4.

Insurable Interest:- Insured must have an insurable interest in the subject-matter. Indemnity:- All the contracts are of indemnity, except those of life assurance and personal accident insurance. Indemnity means compensation of loss.

J J Maini

MIMIT, Malout

10

Causa Proxima:- when a loss has been caused by a number of causes, the nearest cause will be taken into consideration for fixing the liability of the insurance company. CASE:- Hamilton Fraser & Co. Vs. Pandroff(1887) The rice bags in a ship were destroyed due to seawater gushing into ship through a sea hole made by rats in a pipe. Held the underwriter was liable. The proximate cause was sea-water. Had the loss been caused by rats directly the company would not have been liable. 6. Risk must attach:- Premium is the consideration for the risk run by the insurance companies.
5.
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7.

8.

Example:- A property is insured against fire for Rs. 40,000 with insurer X and for Rs. 20,000 with insurer y. there occurs a fire and the damage is estimated at rs 30000. x and y should share the loss in proportion to the amount assured by each of them, i.e. , in the proportion of 2:1. x should pay Rs 20000 and Y should pay Rs. 10000. The policy-holder can sue both the insurers together or insurer X only.
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Mitigation of Loss:- i.e. Minimization of loss. When the event insured against occurs, it is the duty of the insured to take all such steps to mitigate the loss as if he was uninsured. Contribution:-

9.

Period of Insurance :- Specifies the term or period of time it covers. Substitution of the insurer in place of the insured in respect of the latters rights and remedies.

10. SUBROGATION:-

J J Maini

MIMIT, Malout

13

Premium :it can be defined as a price paid adequate to the risk.it is the consideration receivable by the insurer from the insured in exchange of the their undertaking to pay the sum insured in case the event insured against happens. Reinsurance :when some insurance company accepts more liabilities than it can easily bear, it further insures the same or a part thereof such agreement is known as reinsurance.

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DOUBLE INSURANCE: When more than one policy is taken to cover the same risk or when an insured insures the same property with more than one insurer. The insured is said to make a double insurance.

J J Maini

MIMIT, Malout

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