Page 81 - Ebook health insurance IC27

Sashi Publications

Indemnity
 The object of insurance is to indemnify the insured to the extent of loss suffered
 The insured should not make profit out of loss.
 The objective in insurance is to place the insured in the same financial position as he

was before the loss.
 Indemnity and insurable interest are closely linked
 The amount of claim made by the insured cannot exceed the extent of his interest in

the subject matter of insurance
 In insurance at times some potential future losses are also compensated.

For example: Loss of profit insurance. If a factory is damaged in fire, even if the
insurance company pays the loss it will take some time to rebuild a factory and start
the production. If the insured takes the loss of profit insurance the insurance company
will compensate the insured for the loss suffered during the interim period.
 Losses must be assessed by a qualified surveyor in case of general insurance.
 Precise valuation of human life is not possible
 Principle of indemnity does not apply in life insurance

Subrogation and Contribution

This principle prevents the insured for recovering more than the amount of loss under
the policy. For example in caseof marine insurancecargo is damaged dueto the negligence
of the ship owner. In this case the insurance company will pay the insured the full claim
amount but will reserve the right to recover the amount from the ship owner who was
responsible for the loss. Once the loss is paid to the insureds all the rights and liabilities
of the insured will be transferred to the insurer and insured cannot claim in future any
amount from the ship owner.

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