Question

State the following statement is True or False:

All insurance contracts are contracts of indemnity, except the contract of life insurance.

• A. True
• B. False

Answer 1

Answer: (A)

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 a 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.