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For example, Mr. A owns a two-wheeler . The vehicle was stolen and subsequently Mr.A filed
a complaint in local police station. Upon receiving report from police,. the insurance company
compensated fully Mr.A for the loss of the vehicle. Later on the stolen vehicle was recovered by
police. In this situation, the owner of the vehicle does not have any claim over the vehicle as he has
already subrogated i.e. transferred the ownership rights of the vehicle to the insurer. The insurer gets
every right to sell or to scrap the said vehicle.

5) Principle of Contribution:
This principle is applicable to all contracts of indemnity where the insured has taken out more
than one policy for the same risk or subject matter. Under this principle, the insured can claim
the compensation only to the extent of actual loss either from one insurer or all the insurers. If
the one insurer pays full compensation then that insurer can claim proportionate amount from
other insurers from whom insured has taken policy.
For example, Ms. Sayali insures her property of Rs.Two Lac Fifty Thousand with two insurers,
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with T Insurance Co. for Rs.One Lac(2/5 of the property value) and R Insurance Co. for Rs.One
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Lac Fifty Thousand (3/5 of the property value). If Ms. Sayali 's property is destroyed and the loss is
worth Rs. One Lac Twenty Thousand, then both insurance companies will contribute towards actual
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loss i.e.Rs.One Lac Twenty Thousand. Thus company T will pay RS.48000/- (2/5 of the loss) and
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company R will pay Rs. 72000/-(3/5 of the loss).
6) Principle of Mitigation of loss:
Insured must always try to minimise the loss of the property, in case of uncertain events. The
insured must take all possible measures and necessary steps to control and reduce losses.
Hence, it is the responsibility of the insured to protect the property and avoid loss. For exam-
ple, A house of Mr. Jayant is on fire due to electric short circuit. In this case, Mr. Jayant cannot
remain passive and must try his best to save his house from fire. Mr. Jayant must be active and
cannot watch his house burn, just because house is insured.

7) Principle of Causa-Proxima:
Principle of casusa proxima means, when a loss is caused by more than one causes, then prox-
imate cause of loss should be taken into consideration to decide the liability of the insurer. The
property is insured against some causes and not against all causes, in such a case, the proxi-
mate cause of loss is to be found. If the proximate cause is the one which is insured against,
the insurance company is bound to pay compensation and vice versa.
For example, a house was insured against the risk of theft. There was a theft in the house and
before leaving, the house was set on fire by thieves. Now, there are two causes of loss, theft and fire,
and the nearest cause of loss was fire. As the house was insured against theft and not by fire, the
insured will not get any compensation from insurance company for loss by fire. But, he will get the
compensation for the property lost by theft.

4.6.3 Types of Insurance
I) Life Insurance

Meaning:
It is a contract between insurer and insured whereby, the insurer agrees to compensate the insured
a certain sum on the expiry of certain period or on death whichever is earlier for a consideration.

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