6.      The principle of subrogation

Insurance law say after an insurer has paid a claim to insured person he is entitled to all rights and remedies of the insured in mitigating the loss. In simple subrogation means stepping into the shoes of the insured and take all the asset/ property for which the claim has been

paid. The insurance company is entitled to recover compensation from third party if any.

Limitation on the scope of insurance

  1. All risk cannot be insured. Insurance exist to combat risk, but not all risk which are covered by insurance. There must be insurable interest
  2. Insurance limited to financial value. The person seeking the insurance must be legally to insure the article or
  3. There must be large numbers of similar risks. Insurance can only provide monetary
  4. It must be possible to calculate the risk of loss
  5. Losses must be reasonably unexpected
  6. Losses must be accidental. Losses arising through the deliberate acts of the insured cannot be

ADVANTAGE OF INSURANCE

  1. Transfer of loss

The purpose of insurance is to transfer the financial loss to insurer who spreads it over larger numbers (policy holders). The loss suffered by one is distributed over many.

  1. As social security

Insurance provide social security to people.

  1. Development of economy

Insurance mitigates financial losses of the insured people, by theft, fire, loss of goods. Thus, insurance provides the continuity of trade which help for the growth of economy.

  1. Investment of insurance funds.

The insurance companies invest fund collected from the public in various instruments of economy of the country.

  1. It helps people to develop habit of saving and help to generate employment by giving working to insurance
QUESTIONS
  1. Explain the essential elements of the insurance contract
  2. Explain in detail the principles of
  3. Explain the essential elements of the insurance contract
  4. Explain in detail the principles of

ESSENTIALS OF INSURANCE CONTRACT 

Section 10 of the Law of Contract says a contract to be valid must have the following elements:-

  • Agreement (offer and acceptance)
  • Legal consideration
  • Parties competent to contract
  • Free consent
  • Legal object

A contract of insurance is a legal agreement between two or more parties and has to comply with all elements of the law of contract Act.

Insurance contract is the contract between the insurer and insured, in consideration of a sum to make good financial loss of the insured, subject to the limit of the insured specific property against peril and during the stated period.

All insurance contracts must have five elements of a valid contract as follows:-
  1. Offer and acceptance. The person who want to take the cover against a particular peril offers his risk through the proposal form to the insurance company. The insurance company may or may not accept the risk. Therefore, offer come from the insured
  2. Legal consideration. The promise (insurer) promise to pay a fixed sum of money at a given contingency. So the insurer must have something in return for his promise. The premium paid is the consideration given by the insured to the
  3. Parties must have capacity to enter into contract. Every person is competent to contract who has attained the age of majority and of sound mind as well as not disqualified by the law from
  4. Free consent. Both parties must make decision to enter into contract without any influence in their decision making. The consent must not be caused by fraud, undue influence, mistake and
  5. Legal object. The purpose for which the contract is entered must be legally lawful. The contract should not be against the public
FUNCTIONS OF INSURANCE
  1. It helps capital formation
  2. It help to share risk
  3. It helps prevention of losses
  4. It provides protection against economic loss
  5. It provides certainty

 

CHARACTERISTIC OF INSURANCE
  1. It is a cooperative device
  2. It helps risk sharing and risk transfer
  3. It require number of insured to be large to operate properly
  4. It is not gabling
  5. Claim is paid upon the occurrence of the insured event/risk
  6. There must be an uncertain future event as no one knows when, or if, the event insured against will occur. Nevertheless, the party paying for insurance is essentially paying for peace of mind, with the security of being able to transfer any loss that does in fact occur onto the party bearing the
  7. The insured must have an insurable interest in the subject matter of the insurance, whether this is the life or the property in question. Without insurable interest, the contract would be regarded as a gaming or wagering contract and would, therefore, be invalid.
  8. The insurance contract must be lawful. In order for any contract to be enforceable, it must first be legally binding on the parties. In the case of insurance, the insurer must be under a legal obligation to pay the other party when the uncertain event
  9. A contract of insurance must pay money or money‟s worth to the insured as compensation for his loss when the insured event occurs. After all, that is the point of taking up insurance in the first
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6.      The principle of subrogation Insurance law say after an insurer has paid a claim to insured person he is entitled to all rights and remedies of the insured in mitigating the loss. In simple subrogation means stepping into the shoes of the insured and take all the asset/ property...