Description of the Concepts
Thus Features of general contract are:
- Offer and Acceptance: For Contract, there must be offer and acceptance agreement for exchange for exchange of some value. The independent and uninfluenced agreement is precondition for any contract. In insurance, the individual (insured) or public makes offer or proposal for policy and the company or the insurer, makes acceptance.
- Consideration: Consideration is the value of exchange. It means something for something give and take. Each party to the contract must have something. In insurance, the consideration for insurance is premium and that for insurance is the policy an assurance of payment, certain amount or future claim.
- Legality of object: The object of contract must be legal. Contract for illegal action is void. Contract for human trafficking is void. In respect of insurance, law permits life and general insurance or policies that are transacted between the insure or policies that are transacted between the insurer and insured.
- Competence to contract: Parties to the contract must be competent to contract. They must be the age of majority 18 or 21 years under different Laws of countries according to the rules of the Contract. If Act, 1872. The parties must be of the of majority to enter into enforceable.
- Free consent: The parties to contract must agree by free consent. Coercion undue influence, Pressure may frustrate a contract. If there is lack of free consent, and presence of coercion and influence the contract is void able or cancelable at the option of the aggrieved party. Thus insurance contract should also be on the basis of free consent.
Over and above the features of a general contract, a of insurance must possess the following fundament principles, which apply to all types of insurance with a slight variation. These are:
2. Insurable Interest: First important consideration in a contract of insurance is what is called Interest It means some proprietary interest in the absence of which there cannot be insurance. A person is said to have insurance in a property, if he is benefited from its existence and prejudiced by its or destruction.
Insurable interest is a very important condition for insurance. if a person is allowed to insure the property of other to which he has no insurable interest legally he may be tempted to destroy such property to claim insured money. Thus will tantamount to inducement against public policy and as such insurance with conforming to insurable interest and in life insurance, life and soundness of life is insurable interest. If the property or insurable interest is in risk, then insurance converge is sought to have compensation in loss or destruction of the insurable of the insurance interest.
3. Utmost Good Faith: It is another vital element in a control of insurance. It is essential for the validity of every contract of insurance that both the parties to the contract must observe complete good faith while entering into the contract. This principle requires that the insurance must be absolutely truthful in this dealing with the insurance company. The proposer is bound by a legal duty to make a full and fair disclosure of all material fact relating to the proposed insurance which are likely to affect the acceptance of the proposal by the insurance company.
4. Indemnity: Indemnity means, in a contract of insurance that in the event of loss or damage caused to the property or object insured the insurer undertakes to indemnity the loss only and restore to ensured as near as possible to the condition he was in before the loss occurred. Insured will be entitled to recover from the insurer only the actual loss suffered by him through the risk insured against, but not exceeding the amount insured for that the amount of compensation shall be in proportion to the amount of loss. Insurance is contract of indemnity expect those of life insurance and personal accident insurance.
5.Subrogation (Doctrine of Subrogation): Subrogation is the right which on person has, of standing in the place of another and availing himself of all the rights and remedies of that other weather already infused of not. Principles of indemnity prevent and insured from recovering from his insurer a sum greater than the actual financial loss that he sustained. Principles of Indemnity and principle of Subrogation are interrelated. Principles of Subrogation holds that if, by any means the insured gains more than the loss incurred in case of general insurance the insurer stands in place of the insured the insurer can claim and recover the extra amount of the insured.