For example, health event/condition such as serious accident/stroke/cancer/heart attack and everything in between that would cause you to be out of work temporarily or permanently, home fire that burns down half the home, car accident that could be in lacs to a total loss, death and now family is on the street, property stolen, business liability when someone sues you…etc.. 5. An agreement of cover is added in a policy that specifies the conditions under which the insurer agrees to assure the policyholder for loss in contemplation of the payment of a stated payment or payments. Terms of Service 7. It is therefore Primary function of Insurance to provide protection against future risks, accidents and uncertainty. Cover note contains a contract of insurance but it is not a policy of insurance. Therefore Insurance contracts insist on the practice of Utmost Good Faith on the part of the Insured. Perhaps there remains an iota of fear that it may not last for the long. All employees or members are included under one “Master Policy” owned by the employer/nodal agency. Example: A computer repair business has a long-term contract with a local company. (ii) It is one of sources to earn Foreign Exchange: The business of insurance has crossed the national borders of any country. In Insurance contract the insurer is bound by the In simple words, Insurance is a contract in which one party (the insurer), for a consideration (the premium), assumes a particular risk of the other party (the insured) and promises to pay to the other party or his beneficiary, a certain or ascertainable sum of amount on the happening of specified contingency against which the insurance is asked for.There are Various types of Insurance See >>>> … The ultimate meaning comes to ensue security of what a person thinks very important for him. The nature of the contract is a fundamental principle of an insurance contract. Nobody knows what is going to happen in next moment. Insurance is a simple contract based on good faith. Essays, Research Papers and Articles on Business Management, Risk Retention in Insurance: Meaning and Types, Risk in Insurance: Meaning, Types and Its Transfer, Notes on Money Market: Meaning, Functions and Benefits, Notes on Depositing Cash or a Cheque in Your Bank Account, Advantages and Disadvantages of Franchising. One feels insured and contended about future risks only because one is sure to be compensated for any loss of future. By nature insurance is a devise of sharing risk by large number of people among the few who are exposed to risk by one or the other reason. If an insured take such steps he saves a lot in form of the amount of premium required to be paid. Uploader Agreement. If a contract is made with an underage the application may be held unenforceable if the minor decides to repudiate it at a later date. Any Insurance is a contract between insurer and insured for compensating the losses. If you are covered and someone breaks in to your home and steals something you get it replaced, if you break your hip you get it replaced etc. The meaning of insurance in context of insurance business is not easy to define. After making large investments in the business it is natural to take care of the business investments. In case of survival the insurer has to pay after the expiry of a certain period in case of life insurance or to indemnify the insured party on happening of an uncertain event in case of general insurance. Required fields are marked * Comment. The insurance is nothing than a group of people feeling similar kind of risk come together and decide to make contribution towards formation of pool of funds to be used in case of crises arisen out of uncertain happenings. In many ancient societies, merchants and traders pledged their ships or cargo as security for loans. This is because there is an administrative saving for the company, and sometimes also because a particular group has a better life expectancy than people in general. You never know what is going to happen: This is the main reason for having insurance. For instance, there is no pre-approval of contract terms, nor does the ACP systematically check terms and conditions for compliance. INTRODUCTION:- The surety who is entitled to be reimbursed by the principal debtor for the amount paid by him on his behalf. The life insurance is such a cover that provides security to the family of insured in case of his death. So, if the subject-matter for a household insurance contract is only against loss by fire but the house is destroyed by flood, then the insurer is not bound to indemnify the insured at all. A client may request a certificate of insurance in the terms of a contract. Today the life insurance does not cover the risk of life only but also provides many added benefits also in the field of saving and investments. In other words it is a contract for mutual benefits. In the Contract of Life Insurance Premium is Consideration. While on board at sea whether humans or cargo it needs marine insurance which is also spread over across the boarders of any country. Insurance is a policy regulated under laws and therefore the amount of insurance can neither be paid as gambling nor as charity. Having them clearly determined makes it easier to assess risks and to then put mechanisms in place for mitigation. Insurance contract is one that provides benefits to both the insurer as well as insured. In a wagering contract, the parties create the risk and want to make money on the happening or otherwise of an event, while in insurance, the risk already exists and the purpose of contract is simply to transfer the risk.Though there is uncertainty and payment is made on the happening of the event, in both the cases, really it is to so. Required fields are marked *. There are hundreds of definitions of insurance by hundred of persons. Every insurance policy is subject to the terms and conditions contained in the insurance agreement and therefore any insurance serves a limited purpose as agreed to between two parties the Insurer and the Insured. In fact the insurance is the subject matter relating from man to man and a person to person. – It offers a way to replace the loss of income that occurs when the insured person dies, usually … Plagiarism Prevention 5. Life of everyone is full uncertainties. At a very basic level, it is some form of protection from any possible financial losses. Characteristics 7. The large industries have diversified fields of functioning where one field sometimes has no relation with the other field of the same industry. It is pertinent to note that the functions of any insurance remained confined to the terms and conditions of different type of insurance policies. 4. If under a contract of insurance an insurer promises to pay compensation in the event of loss by fire. Need 6. If anyone is satisfied with his present earnings, he also thinks whether or not his present day capacity of earning will last for long. People need insurance because the unexpected does happen. After insuring life or purchasing a life insurance policies no one is absolved of the entire worries of life. Insurance provides facility of financial help in case of contingency. Insurance Contract. Insurable amount is paid either on the occurrence of the event or maturity. Parties are interested in winning and not otherwise 2The insurance contract is based on the principle of indemnity 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 … Discuss the nature, rights and liabilities of a surety. Nature 4. The functions of Insurance cannot be explained because of its diversity but in order to understand we can find a classification of functions as follows: The Primary function of Insurance is as we think about any insurance. These are just for example of the destructive forces of nature. It is therefore clear that insurance is a method by means of which a few losses are shared by a large number of people. However there are certain functions which apply to every kind of insurance including life insurance as well as general insurance that includes every type of insurance such as home, automobile, jewellery, property and other valuable assets. Insurance is contract between two parties (one the insurer and second the insured) whereby the insurer agrees to undertake the risk of the insured in consideration of some amount known as premium and in return promises to compensate a fixed sum of money to the insured party on happening of an uncertain event like DEATH. All these unfortunate events can either be met by paying from one’s own pocket or one may choose to transfer the risk on some consideration i.e., paying of premium to the insurance company which will pay on one’s behalf Insurance company: the company that underwrites the policy and this is where you transfer the risk to by paying a fee which is called the insurance premium. When pocket does not allow to bear the expenses incurred on losses the insurance come to rescue. It cannot be seen or felt. Elements of Insurance Contract This Act says that all agreements are the contract if they are made by the free consent of the parties, competent to contract, for a lawful consideration and with a lawful object and which are not at this moment declared to be void”. This is what marks the difference between a wagering agreement and a contract of insurance because every contract of insurance requires for its validity the insurable interest. Secondly, Insurance is an intangible product. In other word lacs of people contribute towards insurance and only a few people need its cover. There are two alternatives first one is that the concerned businessman should invest out of his own pocket to create a proper security. Huge Collection of Essays, Research Papers and Articles on Business Management shared by visitors and users like you. Ongoing through the functions of insurance there appear that the business of insurance has inherited certain character sticks as well. Meaning of a contract of insurance; Parties to a contract of insurance; Terms of a contract of insurance; Principles of insurance; Types of insurance contracts; Remedies available for the breach of contract (Visited 84 times, 1 visits today) Leave a Reply Cancel reply. (adsbygoogle = window.adsbygoogle || []).push({}); Your email address will not be published. In a situation of terrorists regime any one is exposed to the risk of life and business. The insured, on the other hand, pays a premium in return for the promise made by the insurer. All other contracts are based on present day situation whereas an insurance contract is one for compensating future losses. In its most common usage refers to circumstances in which an insurance company tries to recoup expenses for a claim it paid out when another party should have been responsible for paying at least a portion of that claim. The person who is entering into a contract should enter with his free consent. PARTIES TO INSURANCE CONTRACT  INSURER  INSURED. In simple words, insurance is a contract, a legal agreement between two parties, i.e., the individual named insured and the insurance company called insurer. Credit insurance means of insuring the payment of commercial debts against the risk of non-payment by the borrower because of his insolvency or for some other reason. In case of marine insurance another type of insurance is prevalent known as Mutual Insurance. 4 | IFRS 17, Insurance Contracts: An illustration IFRS 17, IFRS 9 and IFRS 7 allow a variety of measurement, presentation and disclosure options, and industry views of them continue to evolve. In order to protect against such losses one has to bear some financial burden also. The purpose of insurance is to indemnify the insured, or to bring insured back to the same financial position insured were in before insured suffered the covered loss. 6. Though a contract is concluded without issue of policy but it cannot be treated as an evidence if marine policy is not issued with respect to the contract. Is a contract of indemnity by which an insurance company undertakes to make good any damage or loss by fire to buildings or property during a specific time. Insurance is contract between two parties (one the insurer and second the insured) whereby the insurer agrees to undertake the risk of the insured in consideration of some amount known as premium and in return promises to compensate a fixed sum of money to the insured party on happening of an uncertain event like DEATH. Most of the policy buyers particularly individuals do not know the purpose of payment of premium. DIPLOMA IN INSURANCE SERVICES MODULE - 2 Notes Principles of General Insurance Principles of Insurance 56 may not reveal the previous history i.e. 2.  An insurance policy is a legal contract that is agreed upon by two or more parties. It being an international business any country is free to earn foreign exchange as much as per the polices of insurance devised in a way to attract more and more foreign business. This can be ensured by paying certain amount, depending on the risk covered and the amount of expected loss in the form of paying premium to any of the insurance companies. It is a good source of earning foreign exchange for any country. 4. . One cannot expect more than what one has insured himself. 6. Insurance is a means of protection from financial loss. Contract of Insurance. The contract of insurance is very useful to indemnify any loss. The contributions of the insured persons are called premiums. Either one bears all such expenses from his pocket or gets these reimbursed from the insurance company is matter of fact that insurance cover has become a need of the day. The word insurance means ―a contract whereby one undertakes to indemnify