Q: Which of the following is not applicable in life insurance contact?

The contract of indemnity is defined as, " A contract where one party promises to save the other from the loss caused by the conduct of the promisor himself or by the conduct of any other party." In a life insurance contract, nobody can save the life of the person. Hence, contract of indemnity does not apply here.

Question 1

Which of the following is not a function of insurance?

Accepted Answer

Insurance is a means of protection from financial loss. It is a form of risk management primarily hedged against any uncertain future loss. The functions of insurance are risk sharing, assisting in capital formation, economic progress, etc. Lending of funds is not a function of insurance. It is a function of banks.

Question 2

State the following statement is True or False:All insurance contracts are contracts of indemnity, except the contract of life insurance.

Accepted Answer

Uncertainties have led to the formation of the concept of insurance. Insurance is a contract where one party agrees to indemnify the loss of other party at the time of loss, for consideration. The principle of indemnity in an insurance contract safeguards the insured to put him in the same position that he/she would have been in if the loss had not occurred. However, the principle of indemnity does not apply to life insurance contracts. Thus it can be said that all contracts of insurance, except that of life insurance, are contracts of indemnity.Hence, the following statement is true.

Question 3

Which of the following is not applicable in life insurance contact?

Accepted Answer

The contract of indemnity is defined as, &#34; A contract where one party promises to save the other from the loss caused by the conduct of the promisor himself or by the conduct of any other party.&#34; In a life insurance contract, nobody can save the life of the person. Hence, contract of indemnity does not apply here.

Question 4

Essay type questions:What is indemnity? Why the principle of indemnity is not applicable to life insurance?

Accepted Answer

Indemnity refers to make good the loss or damage caused due to an uncertain event. The principle of indemnity states that the insured has to be compensated by the insurer for the loss caused to him and bring him back to the same position in which he was before the loss. The principle of indemnity is not applicable to life insurance because the insurer may pay any amount but the insured cannot be brought back to the same state. Also, the loss of a life is not measurable and no money can indemnify the loss of a life.

Question 5

Write short notes on the following : Principle of indemnity.

Accepted Answer

All the fire and marine insurance contracts are contracts of indemnity. The principle of indemnity states that the insured must be compensated for any loss or damage cause to the goods insured by the insurer. This loss has to be measured in terms of money. According to this principle, the insurer must put the insured in the same position in which he was before the loss or damage occurred. It is not applicable to the life insurance contracts.

Question 6

What is the difference between a Whole Life Policy and Endowment Policy?

Accepted Answer

In whole life policy, there is no period of maturity as it is payable on death, but endowment policy has a maturity period. Rate of premium is low for whole life policy as compared to endowment policy. Premium is payable throughout the life for whole life policy while only for a specified period in endowment policy.

Question 7

What do you mean by Insurance?

Accepted Answer

Insurance is a contract under which the insurer undertakes the responsibility to indemnify the insured against any damage for which it has taken insurance. The insured needs to pay a certain amount of premium to the insurer to avail insurance. Insurance is a contract of indemnity and also is based on utmost faith. There are three types of insurance viz., life, fire, and marine.

Question 8

The main element(s) of a fire insurance contract is/are _________________.

Accepted Answer

All the above are strictly the features of a contract of insurance. Fire Insurance contract is no different from an insurance contract and thus, these are also the features of a fire insurance contract. The insured must have an insurable interest in the subject matter of the contract both at the time of taking the policy and as well as at the time of taking the claim for loss or damage. In this case also the insured must disclose all the material facts such as fire detection and fire fighting equipment, nature of their use, etc. It is a contract of indemnity as the insured can claim only the actual damages from the insurer.

Question 9

An assessee has paid life insurance premium of Rs. 25, 000 during the previous year for a policy of Rs. 1, 00, 000. He shall __________________________.

Accepted Answer

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Question 10

Letter Writing : Write a letter enquiring about fire insurance policy.

Accepted Answer

J.K.L. CO. LTD.                                                     Registered Office: '2', Bombay House,                                                      Modi Street, Fort, Mumbai - 400 001.Tele No.: 67345621                                                                                                   Date: 18th August, 2011Fax No.: 67345621Ref. No.: A5-102The Manager,ABC fire Insurance Company24, Nariman Point,Mumbai - 400 021                                                    Sub.  Inquiry about fire policy.Sir,      We write this to inform you that our factory is located at Malad which is going to start commercial production shortly. Hence, we would like to insure our goods and factory property and premises against risk of loss due to fire. The value of property is worth Rs. 5 crores.     We would like to obtain a fire insurance policy for a period of one year. Kindly let us know the terms and conditions of your company for fire insurance.      Thanking You,                                                                                                                             Yours faithfully,                                                                                                                                      sd/-                                                                                                                                 secretary.

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