In life insurance, the insured must have insurable interest in the life assured. This doctrine emphasizes the presence of … When the ship is insured against any type of danger, it is called ‘Hull Insurance’. Such persons to cover the risk of business due to fire, undertake the consequential loss policy. A contract of insurance does not remain a contract of indemnity if a fixed amount is to be paid by the insurer to the insured on the happening of the event insured against, whether he suffers a loss or not. Insurance has been helpful in solving these problems of business and private life. So utmost good faith on the part of both the parties is a must. 80,000 and with C for Rs.70,000 there is a double insurance because the aggregate of all the policies exceeds the total value of Mr. X’s factory. As such, the duty of good faith can be seen as involving both an objective and subjective element. In case of loss, he may claim payment from the insurers in such order as he may think fit, but he will not get more than his actual loss, because a contract of insurance is a contract of indemnity. If he does not do so the insurer can avoid the payment of loss attributable to his negligence. The insured should be honest and truthful in giving information to the insurance company. It does not apply to life and personal accident insurances. The dissertation includes two essays on insurer's risk management. The applicant has to furnish satisfactory proof of his age to the insurance company. The duty of disclosure at common law begins at the commencement of negotiations for a contract and ends when the contract is formed. They promise to indemnify ‘in the manner and to the extent agreed’. Without insurable interest the contract of insurance is void. So the proposer must answer all the questions correctly. The loss of life cannot be compensated and only a specified sum of money is paid. Essay On Misrepresentation In Contract Law 932 Words | 4 Pages. The form contains a number of questions about the health of the person, family background, and the mode of paying premium. He may suffer from accident, destruction of property from fire, sea, floods, earthquakes and many other causes. It is issued to cover all the fixed and current assets of an enterprise by one insurance. The seller recovered ?? This policy is issued as a whole life policy with a provision to convert it into an Endowment Policy after the expiry of a specified period (say 5 years). A claim for loss by fire must satisfy the following two conditions: (ii) Fire must be accidental and non-intentional. Life insurance policy may be ‘with profit’ or ‘without profit’. A large number of people get insurance policies and make the payment of premium to the insurer. He should not conceal any factual information. 70,000 and with C for Rs. That is why the amount payable in life insurance on the happening of the even is fixed in advance. A false statement, if it is to affect the validity of the agreement must; ‘ be one of fact ‘ be made by a party to the contract ‘ be material ‘ induce the contract ‘ cause loss or disadvantage to the insurer relying on it An insurer may avoid a policy on grounds of innocent, fraudulent or negligent misrepresentation. 6. It can be legally challenged. Such contracts are known as contracts of uberrima fides or contracts based on ‘utmost good faith’. But there are certain cases where the knowledge of facts is almost exclusively on one side. Letter to the FASB and IASB. The common factor is that the insurer or underwriter alone determines ‘what is material’. Uploader Agreement. This policy is popular with those merchants who make regular and frequent shipment of goods through an established route. The loss resulting from the death of life assured cannot be estimated in terms of money and only a fixed amount is paid. The assured must have an actual interest called the insurable interest in the subject-matter of the insurance. Advantages/Utilities/Importance. The summary of the doctrine was given in Rozannes v Bowen (1928), ‘As the underwriter knows nothing and the man who comes to him to ask to insure knows everything, it is the duty of the assured, to make a full disclosure to the underwriter without being asked of the material circumstances. These principles are mostly guided by common law principles from which they have developed. A proposer should disclose all material facts at the time of making the proposal not only those facts which he honestly thinks to be material but every fact which a reasonable man would have thought to be material. Content Guidelines 2. Download the full version above. Many of these representations are responses to questions to determine whether the applicant is insurable or not and how much premium should be charged. In case of fire insurance, insurable interest must be present both at the time of insurance and at the time of loss. If an insurer pays more than this proportion of the loss, he is entitled to recover the excess from his co- insurers. The vector a = («i, a2) completely describes the insurance contract. If at any time a profitable venture comes his way, he may accept a risk beyond his capacity, he may re-insure the same risk either wholly or partially with other insurers. The warranty becomes part of the insurance contract. Fundamental Principles/Features/Essentials of Life Insurance Contract: Life insurance contract is based on certain fundamental principles. Copyright 10. ...(download the rest of the essay above). IASB (2013). If the risk is not run the consideration fails, and therefore the premium received by the insurer must be returned The premium is to be returned even where the risk is not run or could not be run due to the fault, will or pleasure of the assured. Students can use our free essays as examples to write their own. Exposure Draft- Insurance Contract. Where there are two or more insurances on one risk, the principle of contribution applies between insurers. Existing research on insurance contract theory emphasizes information problems and demand side issues when explaining contract structure. In other jurisdictions such as the US, the courts have introduced the concept of a tort of bad faith, which is based on the power imbalance between the insurer and the insured. The assured knows more about the subject-matter of the contract than the other party (the insurer). We've got thousands of real essay examples for you to use as inspiration for your own work, all free to access and download. offer, acceptance, and consideration will not guarantee a legally enforceable contract”. Age limitations for health plan set-up. They have also been modified by principles of contract and by statutes as in the case of the Marine Insurance Act, 1963 which has to a certain extent relaxed the basic principles of insurance law. So insurance has become an important source of capital formation. A material fact is one which goes to the root of contract of insurance, and which must be stated with perfect degree of accuracy. The insurer needs to trust that their client is disclosing all relevant information to them regarding the object that they are insuring and in return the insured needs to trust that the insurer will pay out in the event of a legitimate claim. Insurance provides security against such losses. The insured should be truthful and honest in giving information to the insurance company. In the event of loss, the fixed amount is payable irrespective of the actual amount of loss. Agents also supply this form. In case of ‘Hull Policy’, the amount insured is fixed at a level rather above the current market value and in case of ‘Cargo Policy’, the amount insured also includes an amount for certain charges and profit. If damage is caused by over­heating without ignition, it will not be regarded as a fire loss within the meaning of fire insurance contract and the loss will not be recoverable from the insurer. Husband has interest in the life of his wife and wife in the life of her husband. Fundamentally, however, almost every insurance law problem, dispute, or doctrine is really about paying or not paying claims. Marine insurance is an arrangement by which the insurer undertakes to compensate the owner of a ship or cargo for complete or partial loss at sea. The sum assured under a Joint Life Policy (on two or more lives) is payable at the end of the endowment term or on the first death of any one the lives assured, whichever is earlier. Sometimes a property is insured with more than one company. If the original policy for any reason comes to end or is avoided, the policy of re­insurance also comes to an end. Facts which must be disclosed: ‘ Facts which make a risk greater than usual ‘ Facts which would increase the possibility of a loss ‘ Previous claims or losses ‘ Facts which reduce an Insurer’s subrogation rights ‘ The existence of other Policies ‘ Facts relating to and descriptions of the subject matter of the insurance. THE DUTY OF GOOD FAITH The duty is described as requiring the insurer and the insured to act honestly with each other throughout the duration of the policy. vi. If the person does not die upto the maturity of the policy, he shall get back the insured amount after the maturity of the policy. He is under a duty to disclose accurately all factual information known to him. At the happening of the event insurance company is liable to pay both value of the goods plus profit percentage. The predictable loss is then shared proportionately by all those in the combination.”, According to D.S. The law imposes a positive duty of disclosure as part of a general duty of uberrimae fidei especially on the insured. only episodic rather than on 24/7 basis as typically provided by traditional insurers (e.g. 40,000. This is most popular form of life insurance. A person is said to have an insurable interest in the subject-matter (property or life) if he is benefitted by its existence and is prejudiced by its destruction. The duty does, however, involve notions such as honesty and fairness. Based on primary research, we have identified the following research components: Health limitations of the health insurance plan set-up. Insured knows more about the subject-matter of the insurance. Insurance Law is a Developing Area. The tort adopts the principle that insurance is entered not only for profit but for peace of mind. (v) Mortgagee has insurable interest in the property which is mortgaged. However, an insurance company can repudiate a claim on the bases of concealment. Content Filtration 6. Insurance Contracts │ Presentation of insurance contracts on the statement of financial position Page 5 of 25 Offsetting assets and liabilities differs from treating a set of rights and obligations as a single unit of account.2 Premium allocation approach 15. To conclude, a contract of insurance is a contract by which a person, in consideration of a sum of money, undertakes to make good the loss of another against a specified risk, e.g., fire, or to compensate him or his estate on the happening of a specified event, e.g.. accident or death.