Page 98 - Ebook health insurance IC27

The Insurance Times

(c) Indemnity - Insurance would tend to become a gambling transaction in non-life
contracts without the principle of indemnity. The objective is to compensate the
insured for the loss suffered, by placing him in the same financial position he was,
immediately before the loss happened. He should not be made poorer , nor allowed
to make profit. In contrast, life and personal accident insurances are not contracts
of indemnity, but benefit policies.

This means that a person can affect any sum assured so long as he can afford to
pay the premiums, and the insurer is prepared to underwrite the risk. Under the
indemnity principle, the occurrence of the insured event does not entitle the insured
to compensation unless the insured suffers a monetary loss. Indemnity in all cases,
will, of course, be limited by
(i) The sum insured
(ii) Limitofliability
(iii) Deductibles under the policy and
(iv) Any other cost sharing provisions in the policy.

The full sum assured can be paid if the assessed loss is equal to, or more than the
sum insured, subject to satisfactory compliance of the terms and conditions of the
policy.

(d) Contribution - These clauses are usually present in medical insurance contracts.
These clauses apply when more than one contract covers the same loss. In most
cases, each insurer's share of the loss is based on the proportion that its insurance
bears to the total amount of insurance, i.e., rateable proportion basis.

(e) Proximate Cause -The insurer is liable only if the losses have been caused by the
peril insured against. The principle of proximate clause is applied to determine as

102 Guide for Health Insurance