Page 54 - Ebook IC S01

Survey And Loss Assessment IC-S01

The parties to the insurance contract must be of the same mind. Both must agree on

the same subject and the same terms of the contract they are entering. General

commercial contracts are governed by the principles of let the buyer beware. This

means it is the duty of the buyer to be careful before entering into any agreement.

But this does not apply to the insurance contracts. Insurance contracts are based on

mutual trust.

The prospective insured must disclose everything best of his knowledge in the

proposal form before entering into the insurance contract. Sometimes some diseases

cannot be detected by tests. It may appear at a later stage. So insurer believes that

all informations has been duly disclosed by the insured.

In case of nonlife insurance an insurer practically cannot verify the establishment or

the property to be insured. It must rely on the declaration made by the insured on

good faith. The policyholder must disclose all the material facts which are relevant to

the assessment of the risk. When the policyholders deliberately withhold any

information it is known as adverse selection

A contract may be void ib inito ie void since inception. A contract can also be

voidable at the option of one or more persons. A person may avoid the contract at a

later stage if he finds that some terms and conditions has not been observed

properly.

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