What do you mean by insurance?
Insurance is a contract between the insurer (insurance company) and the insured in which insurer agrees to provide financial protection to the insured on happening of certain specified risks for a price called as premium.
Elements of a valid contract
- Offer and acceptance
- Agreement between parties
- Free consent
- Capacity of the parties
Insurable interest is considered as legal pre requisite for insurance. It is the reasonable concern of a person to obtain insurance for any individual against unexpected events.A person has an insurable interest in something when loss or damage to it would cause emotional or financial loss to that person.
Insurable interest can be in
- Self (Own life)
- Spouse’s life
- Children’s life
- Asset/s owned
Proximate cause: It is defined as the active and efficient cause that sets in motion a chain of events which brings about a result, without the intervention of any force started and working actively from a new and independent source.
UTMOST Good Faith: Both parties should disclose all material facts relating to subject matter of insurance, accurately, whether requested or not.
All commercial contracts form CAVEAT EMPTOR (Buyer’s Beware).
Material Facts to be disclosed
Life Insurance: Own medical history, family history, illness habits like smoking, drinking, occupation etc.
Fire Insurance: Construction and usage of building, age of building, goods in premises.
Marine Insurance: Prescription of goods/methods of packing.
Motor Insurance: Description of vehicle, date of purchase, details of driver.