Page 185 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Insurance Laws and Practices

Notes Self Assessment

Fill in the blanks:
1. Presence of a …………………………………………… is a must to have the risk of fire
covered.

2. Fire insurance contracts are a part of general insurance and are contracts of
…………………………..
3. A fire insurance policy cannot be assigned without the permission of the
……………………………
4. A person with a ………………………… interest in a property or goods may insure them to
cover not only his own interest but also the interest of others in them.

10.2 Elements of Fire Insurance

In this section, we will discuss about the elements of fire insurance.
All the essential elements of an insurance contract are present in a fire insurance contract. The
essential elements are:
1. Capacity to Contract: The parties to the contract should have the capacity to contract. He
should not be a minor, adjudged insolvent or insane.
2. Consideration: The consideration of the contract should be lawful and not forbidden by
the law.

3. Object: The object of the contract should be lawful and not against the public policy or
public interest.
4. Free Consent: The contract should have been concluded with the free consent i.e. without
coercion, undue influence, fraud or misrepresentation.
5. Parties to Contract: The insurer and insured are the parties to the fire insurance contract.
The provisions of Insurance Act, 1938, define the insurer’s role. The act defines the insurer
and renders his registration compulsory.

Notes The contract should be backed by the presence of consideration. The premium paid
by the assured to cover the risk is the consideration by the assured and the promise made
by the insurer to pay the compensation for the damage by fire is the consideration from
the insurer.
6. Uncertain: The happening of event should be uncertain.
7. Insurable Interest: The presence of insurable interest is a must to validate the fire insurance
contract.
8. Contract of Uberrima Fides: The fire insurance contract, being a typical insurance contract,
is a contract of uberrima fides, i.e. utmost good faith must be there between the insurer
and the insured.
9. Principles of General Insurance: The fire insurance contracts insure the property of the
assured and are covered by the principles of general insurance. The contract of insurance
cannot save the asset from the risk but it can provide the compensation or replacement in
place of the asset that is lost/damaged by fire.

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