Page 250 - DMGT303_BANKING_AND_INSURANCE

Unit 12: Insurance

Notes
Table 12.1: Distinction between the Insurance and Wagering Contract
Insurance Contract Wagering Contract
1. Insurable interest is the subject matter 1. In a Wagering Contract, the interest in the
in contract of insurance asset or event is limited. Parties are interested
in knowing only for the purpose of winning
or losing upon the future events.
2. Contract of insurance is essentially 2. In a Wagering Contract, there is no question
based on principles of indemnity. of indemnity because no risk is covered.
3. Contract of insurance is legally 3. A Wagering Contract is void because it is not
enforceable. recognized by law.
4. Contract of insurance is based upon the 4. There is no question of disclosure of material
principles of good faith i.e., full facts as it is not required by either party in
disclosure of material facts required by Wagering Contract.
both parties to contract.
5. Risks and Premium are fixed on the 5. No such calculations are made in the
basis of scientific methods. Wagering Contract.

Table 12.2: Differences between Insurance and Assurance
Insurance (Non-Life Insurance) Assurance (Life Insurance)
1. The term ‘Insurance’ is used for non-life 1. The term ‘Assurance’ is referred to life
insurance contracts. insurance business.
2. In the case of insurance, loss due to risk is 2. Loss due to risk is certain to happen.
not certain to happen i.e., loss is likely to Death is bound to happen sooner or
happen or not. later.
3. Generally, goods or property are the subject 3. Human life is the subject matter of life
matter of non-life insurance. insurance contract.
4. Insurance contract is usually for one year. 4. Life insurance contract, is a continuing
contract, i.e., long-term contract.
5. Fire, marine insurance and other contracts 5. It is not a contract of indemnity. Since
are contracts of indemnity. life lost cannot be returned.
6. In fire insurance, insurable interest must be 6. Insurable interest must be present only
present both at the time of affecting the at the time of taking out the policy, but
policy and also at the time of occurrence of need not be present at the time of
loss too. In marine insurance it must be maturity of the policy.
present only at the time of loss. It is not
necessary at the time of affecting the policy.
7. In the case of marine and fire insurance, 7. A life insurance policy can be
policy cannot be surrendered by the assured surrendered by the assured before its
before its maturity. maturity.
8. In the case of fire and marine insurance, 8. Life insurance contains both the
insurance contain only the protection elements of security and investment.
element.

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Caution The general principles of law of contract must be complied with for a contract of
insurance to be valid.

Notes In an insurance contract, one should remember that a right created for one party
represents a duty for the other party.

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