Nature of insurance contract a contract of insurance is an agreement whereby one party, called the insurer, undertakes, in return for an agreed consideration, called the premium, to pay the other party, namely the insured, a sum of money or its equivalent in kind, upon the occurrence of a specified event resulting in a loss to him. An insurance contract is a contract under which one party the insurer accepts significant insurance risk from another party the policyholder by agreeing to compensate the policyholder if a specified uncertain future event the insured event adversely affects the policyholder. Nature and contractual obligation legal definition of nature. Fire insurance is insurance that covers damage and losses caused by fire. After the cancellation of sxsw, we need to think about those force majeure clauses that everyone skips over in contractual boilerplate. A fire insurance is a contract under which the insurer in return for a. In both life and health insurance, most state insurance laws limit the period usually one or two years during which the insurer may void coverage. The elements of an insurance contract are the standard conditions that must be satisfied or agreed upon by both parties of the contract. A fire insurance policy is a contract between the insurance company and the insured when the. Broad categories include life, health, motor, travel, home, rural, commercial and business insurance. The printed form of a policy of fire insurance, as set forth in subsection f of this section, shall be known and designated as the standard fire insurance policy of the state of louisiana. It is a specific form of insurance in addition to homeowners or property insurance, and it covers the cost of replacement and. The special nature of the insurance contract 379 this socalled rule of strict construction is the hallmark of a contract of adhesion of which insurance is the classic example. Marine insurance was useful only to persons engaged in some kind of trade.
There is a huge difference between the contract of wager and a contingent contract. Fire insurance is a measure, which provides security against the risk of fire. Insurance policies, a contract between the policyholder and the insurance company, are of different types depending on the risk they mitigate. A fire insurance is a contract between a policyholder and the insurance company in which the insurer agrees to compensate the insured in case of loss or damage happens to a particular property due to fire. Introduction to fire insurane in strict sense, a fire insurance contract is one. It is important that the insured disclose all relevant facts to the insurance company. Therefore, the insurance contract must contain all the essential elements of a contract under the law of contract.
The insurer is liable only to the extent of the actual loss suffered. Life insurance, fire insurance, and marine insurance meaning toppr. May 17, 2019 therefore, when applying for fire insurance, for example, you should make sure that the information that you provide regarding the type of construction of your building or the nature of its use is. If there is no loss there is no liability even if there is a fire. A contingent contract on the other hand is contingent on the happening of any event that may result in loss of the promise. The purpose of any insurance is to provide economic protection against the losses that may be incurred due to chance events such as. Introduction introduction life insurance marine insurance fire insurance miscellaneous insurance prospects of. For this purpose the life insurance transaction is probably better laboratory material than fire, casualty, or some other type of in. In terms of insurance, these are the fundamental conditions of the insurance contract that bind both parties, validate the policy, and makes it enforceable by the law. Force majeure contracts and insurance in the music. Insurance is basically a contract, between the insurer and insured.
The proposal for fire insurance can be made either verbally or in writing. The premium is also predecided and the insurer compensates for the loss up to the insured amount only. Fire insurance, provision against losses caused by fire, lightning, and the removal of property from premises endangered by fire. As no property is resilient to fire or other natural disasters. Fire insurance covers damage or loss to a property because of fire. Force majeure or the less secular act of god clause is a species of the impossibility of performance defense to a breach of contract claim that excuses the liability of a nonperforming party. Clearly, no insurance agent is going to ask you when you apply for insurance if the neighbors house is on fire.
Insurance contracts are not limited to the above category, there are also insurance. Nature of contract is a fundamental principle of an insurance contract. Important characteristics of a fire insurance every insured should. Insurance is a contract by which one party, for a compensation called the premium assumes particular risk of the other party and promises to pay to him or his nominee a certain or ascertainable sum of money on a specified contingency. May 25, 2019 nature of insurance contracts life is full of uncertainty, some of which end up being positive while others tend to be negative. Therefore, when applying for fire insurance, for example, you should make sure that the information that you provide regarding the type of construction of your building or the nature of its use is.
The special nature of the insurance contract duke law scholarship. Insurance is a contract between the insurance company and the policyholder wherein the policyholder insured makes an offer and the insurance company insurer accepts his. The employer receives a master contract in group insurance, document issued to employer describing all the terms and conditions of the group policy. On the basis of the definitions of insurance discussed above, one can observe the following nature or characteristics. Life insurance contract may be defined as the contract, whereby the insurer in consideration of a premium undertakes to pay a certain s. Any facts that would increase his premium amount, or would cause any prudent insurer. For whom will the insured received payment for the loss the company will pay the loss,and then will required the insured to assign to them their right of recovery from the person responsible for the loss, to the extent paid by the company. The contract of insurance thus serves two main purposes as follows. Introduction introduction life insurance marine insurance fire insurance miscellaneous insurance prospects of insurance business insurance legislation 5.
The major event of wager is not causing any loss to the promisee. A fire insurance is a contract between a policyholder and the insurance company in which the insurer agrees to compensate the insured in case of loss or. The basic fact about life insurance recognized in this case is that a contract of life insurance is not a contact of indemnity. A contract of insurance must be made based on utmost good faith a contract of uberrimate fidei. Insurance contract, general legal definition of insurance. A contract should be simple to be a valid contract. Insurance pdf types of insurance, scope of insurance. All the features of general contract are also applicable to the fire insurance contract. Which agency regulate insurance sector in india insurance service pdf. A fire insurance plays an imperative role by shielding you against various types of losses or damages which may arise due to fire. Definition of fire in insurance the fire insurance contract is defined as an. The policyholder and the insurer must disclose all the material facts known to them. The fact that the agent does not ask does not relieve you of the responsibility.
In an insurance contract an offer and acceptance is not a requirement. Fire insurance, marine insurance, and life insurance are the contracts to protect. It automatically lapses after the expiry of the year, unless it is renewed. Notes on meaning, nature, subject matters and principles of. Fire insurance policies cover damage caused by fire, explosions, earthquakes, lightning, water, wind, rain, collisions, and riots. They are offer and acceptance, legal consideration, capacity to contract, free consent, and. The extent of insurers liability being limited by the sum assured and not necessarily by.
A contract is made between the insurance companies and insured against a certain amount of premium to protect from the risk of waterways, which is known as marine insurance. Which agency regulate insurance sector in indiainsurance service pdf. Average clause in fire insurance policy to take care of cases of underinsurance, there will be an average clause in fire policy. International trade involves transportation of goods from one country to another country by ships. Elements of insurance contracts are basically 2 types. Fire insurance definition, characteristics and policies.
The great fire of london in 1956 destroyed,000 houses in four days. A building, insured under a standard fire policy, is damaged by fire for which another person is responsible. Important characteristics of a fire insurance every insured. Casualty insurance protects the insured against a variety of losses, including those related to legal liability, burglary and theft, accidents, property damage, injury to workers, and insurance on credit extended to. The purpose of a contract is to establish the agreement that the parties have made and to fix their rights and duties in accordance with that agreement. A contingent contract on the other hand is contingent on the happening of. It was initiated from england when london city was caught by fire devastation in 1666 a. The premise is that the insurance contract is drawn up by the insurance company, which, staffed with expert legal counsel. Any facts that would increase his premium amount, or would cause any prudent insurer to reconsider the policy must be disclosed. The best explanation of the definition and nature of life insurance contract undoubtedly occurs in the case titled dalby v. Life insurance contract may be defined as the contract, whereby the insurer in consideration of a premium undertakes to pay a certain sum of money either on the death of the insured or on the expiry of a fixed period. A contract is made between the insurance companies and insured against a certain amount of premium to protect from the risk of waterways, which is known as. Notes on essential elements and principles of insurance.
The nature of the contract itself qualifies the words deat. The persons who are importing the goods will like to ensure the safe arrival of their goods. Fire insurance is a contract to indemnify the loss suffered by the insured. An insurance contract comes into existence when one party makes a proposal of a contract and the other party accepts the proposal. Essential elements of insurance contract businessmarketing. Fire insurance features average clause insurable interest. Important characteristics of a fire insurance every.
The meaning of fire in an insurance policy against loss or. Whose principle object is insured against loss or damage occasioned by fire. Central to any insurance contract is the insuring agreement, which specifies the risks that are covered, the limits of the policy, and the term of the policy. If one goes by the word meaning insurance is a contract between two parties whereby the insurer agrees to indemnify the insured. Scope of the insurance this insurance covers material damage not exceeding the sum insured caused directly by fire, lightning, explosion or smoke, steam and heat occasioned by fire and explosion in the insured property. Distinguishing characteristics of insurance contracts.
The fire insurance contract is defined as an agreement, whereby one party in return for a consideration undertakes to indemnify the other party against financial loss which the latter may sustain because of certainly defined subjectmatter being damaged or destroyed by fire or other defined perils up to an agreed amount. Nature of insurance origin and development of insurance marine insurance fire insurance life insurance miscellaneous insurance essential elements of insurance. The courts must enforce a valid contract as it is made, unless there are grounds that bar its enforcement. The fire havoc can be experienced by persons of all walks of life. The administration of group insurance differs from individual insurance because the contract is made with the employer rather than with each individual. Insurance may be defined as a contract between two parties whereby one party called insurer undertakes, in exchange for a fixed sum called premiums, to pay the other party called insured a fixed amount of money on the happening of a certain event. In an insurance contract no principles of contact are applicable. Your business for example could be doing well today and then later in the day a riot breaks out and your assets get looted or engulfed in flames. Property insurance what is the scope of fire insurance policy. An insurance contract is a document representing the agreement between an insurance company and the insured. In an insurance contract a prospect makes an offer and an insurer accepts it. Utmost good faith a fire insurance contract is governed by the principle of utmost good faith that says it is necessary for the policyholder to disclose all vital points with regard to the subjectmatter of the insurance policy so that the insurer can have a proper calculation with regards to the risks involved. Essential elements of insurance contract the contract of insurance is very useful to indemnify any loss. Insurance, definition of insurance, characteristics of.
Moreover, a fire insurance policy can be purchased by both households and business owners. Insurance is a contingent contract but is not a wager. A fire insurance contract is a contract of indemnity. Jun 25, 2019 fire insurance covers damage or loss to a property because of fire. Fire insurance is a contract between the insurer and insured by which, the former undertakes to indemnify the latter the financial loss caused by fire in consideration to a. This type of insurance protects the goods on the ship from loss due to natural.
1593 940 469 831 1130 188 732 21 638 1272 1268 1094 325 428 892 7 490 351 842 134 1462 945 687 151 833 1438 857 726 236 667 543 264