Page 302 - Ebook health insurance IC27

The Insurance Times

and nondisclosure. Representations are statements made by the applicant for insurance.
For example, the applicant for medical insurance is asked to complete medical history
declaration that is usually incorporated within the application from. The declaration
includes questions concerning the applicant's age, weight, height, occupation, state of
health, family history, and other relevant questions. The statements given in reply to such
questions are called representations.

Indemnity
The principle of indemnity is one of the most important legal principles in the field of
insurance. The principle of indemnity states that the insured should not profit from a
covered loss but should be restored to approximately the same financial position that
existed prior to the occurrence of the loss. Most medical insurance contracts are contracts
of indemnity. If a covered illness occurs, the insured should not collect more than the
actual cost of the treatment.

There are some policies (Hospital Cash Plans), which pay a fixed amount for each day
of a hospital stay, regardless of the cost of the treatment. These are not contracts of
indemnity, and the principle of indemnity has no relevance to such contracts.

Subrogation
The principle of subrogation strongly supports the principle of indemnity. Subrogation
means substitutionoftheinsurerinplaceoftheinuredforthepurposeofclaiming indemnity
from a third party for a loss covered by insurance. Stated simply, this means that the
insurer is entitled to recover from a negligent third party any loss payments made to the
insured.

306 Guide for Health Insurance