Training Materials About Banking

Insurance

Introduction-Insurance is concerned with risk. Risk is defined as uncertainty of financial loss. Risk cannot be averted but loss occurring due to certain risk can be distributed among others. From this concept insurance is introduced. Every risk involves the loss of one or other kind. The function of insurance is to spread the loss over a large number of persons who are agreed to cooperate each other at the time of loss.

Definition of Insurance – The definition of insurance can be made from two points of view: (i) Functional, and (ii) Contractual.

Functional definition- Insurance is a cooperative device to spread the loss caused by a particular risk over a number of person who are

exposed to it and who agree to insure themselves against the risk.

Contractual definition- Insurance may be defined as a consisting one party (the insurer) agrees to pay to the other party ( the insured) or

his beneficiary a certain sum upon a given contingency (the risk) against which insurance is sought.

Insurance Contract- The insurance contract is an agreement/contract between two parties whereby one party called insurer undertakes, in exchange for a fixed sum called premiums, to pay the other party caller insured a fixed amount of money on the happening a certain event.

Essentials of insurance contract- Insurance contract involves –(a) the elements of general contract, and (b) the elements of special contract relating to insurance.

The special contract of general insurance involves principles: (i) Insurable Interest, (ii) Utmost good faith, (iii) Principles of indemnity, (iv) Principles of subrogation, (v) Warranties, (vi) Proximate cause, (vii) Assignment of Transfer of Interest

1. Insurable Interest- For a insurance contract to be valid, the insured must posses an insurable interest in the subject matter of insurance. Here the very points are i) A subject matter to be insured , ii) Policy holder should have monetary relationship &...