Insurance contract an agreement b/w 2 parties for loss indemnity objective to fold purpose nature depends on risks, protect risk anticipates.
Ii is an agreement between two parties in which one party agrees to compensate the other for any future loss suffered by him. And he does it so by accepting a premium, the parties who promised to save other is known as “Insurer” and in favour “Insured”. Insured is the party in whose favour such promise was made.
The contract of insurance must be in writing and in India they are regulated/ governed by insurance act 1938. And rules made by insurance regulatory and development authority (IRDA).
Essential of Insurance contract
- A written agreement between parties.
- AGREEMENT= offer+ acceptance+ consideration.
- There must be free consent of insured, without Coercion, fraud, undue influence, mistake, misrepresentation.
- They shall be Competent Parties, means who are of sound mind and major to understand.
- Lawful object and lawful consideration section 23 of Indian contract act 1892.
- Not expressly void.
General principle of insurance contract
- The contract of insurance must be insurable interest.
- Insurance contract shall follow Uberima fides means at most good faith.
- Contract of indemnity all contract are contract of indemnity except Life Insurance. Indemnity means to compensate the other in the future certain loss.
- Insurance contract follow the principle of causa Proxima. Causa Proxima means proximate cause, that is helping to identifying the most direct link between an action and the resulting harm.
- Subrogation principle means replace or substitute the liabilities.
- Example: A a Company give compensation to B and then A can recovery to loss to C where B can also suit C for the compensation. But he claim his loss to company, now company can take a recover it’s loss from C.
- Principle of loss minimization
- It is the duty of insured to minimise his loss if he can do so.
- Principle of Contribution.
Insurable interest insurance contract
The test for a valid insurance contract is the existence of the insurable interest the insurable interest. Insurable interest is nothing but an interest of such a nature that the occurrence of an event insured against would cause financial loss to the insured.
And such interest can be protected by a contract of insurance, this interest is considered as a form of ‘property in the eye of law’.
The insurable interest should exist at the time of happening of the event in the general contract insurance. But it is not necessary so in cause of life insurance contract.
This is because general insurance is the contract of indemnity while life insurance is the contract of assurance.
Example : In case of fire insurance a person(insured) suffers more loss under a policy, if at the time of loss or damage he has no interest in the property either fully are partially.
If the insured has no interest at the time when event happens. It is clear that he cannot recover anything because he suffers no loss and therefore has no claim to an indemnity.
Similarly, if he has an interest which is limited to something less than the full value of the subject matter. He suffers no greater loss than the value of his interest at the time of the loss and therefore his claim to indemnity cannot exceed the value of his interest.
Meaning of Insurance, Insurance law notes
The aim of insurance is to protect the insured from the variety of risk which he anticipates.
The Fundamental functions of insurance is to shift the loss suffered by sole individual to a willing. And capable professional risk bearer in Consideration of a comparatively small contribution or premium.
Insurance is a process whereby risk of financial loss arising from death or disability of a person. Or damage, destruction or loss of property owing to perils of which they are exposed is assumed by another.
According to “McLean” insurance is a method of spreading over large number of persons. A possible financial loss too serious to the conveniently borne by a individual.
Objective of Insurance, law notes
Insurance serves to fold purpose
- Immediate/ short term purpose:
- The immediate purpose is to spread over loss risk or damage large number of risk bearers and immediate beneficiary is the insured.
- Long term purpose:
- The long term purpose is an economic growth of nation through investments by insurance company in the development of a Commerce and industry of the nation.
Nature of insurance
The nature of insurance depends on the nature of risk to be protected and insuranceContracts makes available the risk coverage to the insured.
Buyer of insurance fees a premium in exchange of financial reach to be covered.
Law of insurance forms part of general law of contract and whatever type of contract of insurance maybe, it always represent the agreement between the insured and the insurer.
The essential ingredient of a contract of insurance:
- Offer and acceptance
- Consideration
- Capacity of the parties
- Legality of the object and consideration.