Insurance Act

1. Insurance Act Business Law www.assignmentpoint.com

2. Life is risky. Insurance provides a financial buffer against risk. But purchasing insurance without understanding its law creates its own risk.” www.assignmentpoint.com

3. Insurance Contract • contract of insurance is contract between two parties where by one party , call the insurer, agrees to pay the other party a certain some of money on the happening of a specified contingency or agrees to indemnify the other party from losses arising from certain specified events. The other party calledinsured or assured and the agreed sum of money called premium. www.assignmentpoint.com

4. The advantages of insurance The advantages and object of insurance – • cover risk - method of eliminating or reducing risk – for the future uncertain events like fire , accident or early death • small loss –convert s an uncertain risk into certain and ascertain sum of money - thus by insurance a person exchanges an uncertain heavy loss for a certain sum of money • small premium- insurer can undertake the risk for small premium- after statistical method of calculating how many ship can be lost • Expansion of insurance business- expansion of the volume of insurance business and the evaluation of many different types of insurance www.assignmentpoint.com

5. Characteristics • 1. An insurance policy must meet all the common law requirements for a contract. • The purchase of a policy makes an offer by delivering an application and a premium to the insurer. It can be accepted by oral notice, by written notice, or by delivery of the policy. www.assignmentpoint.com

6. Characteristics • 2. Insurable Interest- An insurance contract is not valid unless the owner has an insurable interest in the subject matter of the policy. • Insurable interest means some proprietary or monetary interest .This means you must have some financial stake in the subject of the insurance policy. • The insurable interest must exist at the time of loss, and cannot be for more than the amount of loss. www.assignmentpoint.com

7. Characteristics 3. Good faith – Insurance is subject to the rule of the "utmost good faith". -it is the duty of the insured person to disclose all material facts concerning the subject matter. • Material fact is one which affect the nature or incidence of the risk –You must tell about all issues that may affect the risk in the underwriter's judgement. • Disclosure must be full and fair -Disclosure of facts should be substantially accurate • Misleading statement amount to breach of duty. But unimportant statement may be excused • If you don't tell all facts, there is a loss, it's found out, the insurance company does not have to pay! www.assignmentpoint.com

8. Characteristics • 4. indemnify- Indemnity is the process of putting you back to the position prior to the loss. • it’s a contingent contract – money is payable on the happening of a contingency -the date of which is uncertain. • usually has a limit (per loss perhaps). • you must prove loss (invoice, bills of sale, etc.). www.assignmentpoint.com

9. Characteristics • 5. causa proxima- liable only for those losses which directly and reasonably followed from the event ensured • 6. right to contribution- if a property is ensured by several insurers against the same risk . the insurer must share the burden of payment in proportion to the amount assured by each • 7. The principle of subrogation - If an insurance company pays a claim, it is subrogated to the rights of the insured, meaning that the company acquires whatever rights the insured has against any third parties. • 8. mitigation of loss- never more than indemnify • 9. commencement of risk – the risk commences after the contract • 10. payment of premium- according to the terms of contract www.assignmentpoint.com

10. Insurers’ Rights • The payment of premium • The right to contribution and subrogation • Insurers have the right to void a policy if, during the application process, the insured makes a material misstatement or conceals a material fact. • Insurance policies often contain a covenant of good faith and fair dealing, which may be violated by: Fraud, Refusing to Pay a Valid Claim • Insurers have the right to void a policy if the insured violates a warranty. www.assignmentpoint.com

11. Life Insurance • Term Insurance – simple, cheap; covers a particular time period • Whole Life Insurance (straight life) – more expensive, but forces policyholder to save; part of premium goes into a savings, giving the policy cash value. • Universal Life – a hybrid of term and whole life; premiums may be adjusted some. • Accidental Death – policy may have a double indemnity clause, doubling the value of the policy if the death is accidental. • Health Insurance-In a pay for service plan, the insurer pays for almost any treatment ordered by almost any doctor. In managed care plans, patient and doctor choice is limited, in order to limit costs. • Disability Insurance- Disability insurance replaces the insured’s income if he becomes unable to work because of illness or injury. www.assignmentpoint.com

12. Fire- You can insure building, contents, equipment, furniture, stock (inventory), everything. • Liability Insurance-The purpose of liability insurance is to reimburse the insured for any liability she incurs by (accidentally) harming someone else. • Liability insurance covers: • Injuries sustained on the insured’s property • Injuries to another’s property caused by the insured • Professional malpractice • Product liability • Automobile Insurance- pays to repair or replace a car damaged in an accident. • Comprehensive – covers fire, theft and vandalism. • Liability – covers harm to other people or other property (usually required). • Uninsured Motorist – covers the insured and all passengers who are injured by another driver who does not have insurance. • There are two types of vehicles: owned and non-owned. Both must be covered specifically if the risk is there. www.assignmentpoint.com

13. Property insurance (casualty insurance) typically does not cover: • Earthquakes and floods (unless a special rider is added) • Friendly fire (fire that stays where it is supposed to be) • Employee theft or embezzlement-- Employee dishonesty and some others. • Merchandise lost or damaged in transportation www.assignmentpoint.com