What insurance companies do is to bear risk in return for a fee called premium. Thus, insurance companies are risk bearers. They accept or underwrite the risk in return for an insurance premium. Accordingly, the term insurance may be defined as a co-operative mechanism to spread the loss caused by a particular risk over a number of persons who are exposed to it and who agree to ensure themselves against that risk. Risk is, in fact, an uncertainty of a financial loss. Risk must not be confused with loss itself that is the unintentional decline in or disappearance of value arising from a contingency. The functions of insurance include providing certainty, protection, risk sharing, and prevention of loss and capital formation. Wherever there is uncertainty with respect to a probable loss there is risk. The insurance is also defined as a social apparatus to accumulate funds to meet the uncertain losses arising through a certain hazard to a person insured for such hazard.
Insurance is a tool by which fatalities of a small number are compensated out of funds (premium payment) collected from plenteous. Insurance companies pay back for financial losses arising out of occurrence of insured events, e.g. in personal accident policy death due to accident, in fire policy the insured events are fire and other allied perils like riot and strike, explosion, etc. Hence, insurance is safeguard against uncertainties. It provides financial recompense for losses suffered due to incident of unanticipated events, insured within policy of insurance.
[...] Principle of Good Faith: The contract of fire insurance is one in which the observance of the utmost good faith uberrima fides by both the parties are of vital significant. The utmost good faith in fix insurance has two aspects first, disclosure of material facts and second, preservation of the property insured. The insurer and the insured must furnish detailed information regarding the subject –matter to be insured. The insured, since he has more information about the subject matter, must disclose all the information asked truly and fully. [...]
[...] If a tenant does not pay rent because of fire in the rented portion, the insurance company will pay for such loss. This may constitute a separate policy, or can be included within other forms of cover and may be affected either by the owner, or by the tenant or by an owner-occupier. If the tenant is not paying rent because of fire, the owner can claim rent from the insurer. If a tenancy agreement requires for such insurance, the tenant should insure under this policy. [...]
[...] INTRODUCTION TO FIRE INSURANCE 2.1 Meaning Fire insurance is a contract to indemnity, to the insured for destruction of or damage to property caused by fire. The insurer undertakes to indemnify the insured against loss due to fire caused to the property insured against, not in excess of the maximum amount stated in policy. A contract of indemnity, and not against accident, but against loss caused by fire. For example, if a person has insured his house of $ 2046 against loss by fire, the insurer is not liable to pay the sum, unless the house is destroyed by fire, but actual loss subject to the maximum limit of $ Definition Section of the Fire Insurance Act, defines, “Fire insurance business means the business of affecting, otherwise than in evidently, to some other class of business, contacts of insurance against loss by or incidental to fire or other assurance customarily included among the risks insured against in fire insurance policies.” 2.3 Characteristics or Nature of Fire Insurance It is a means of security against risk of fire on any material or property. [...]
[...] FIRE INSURANCE CONTRACT Fire insurance contract may be defined as agreement whereby one party in return for a consideration undertakes to indemnify the other party of certain defined subject-matter being damaged or destroyed by fire or other defined perils up to an agreed amount.” The party responsible to indemnify the loss is called the insurer, the party who is to be indemnified is called the insured, the consideration for the contract is termed premium', the defined subject matter is termed property insured' the sum set forth in the contract is called the assured sum, and the document containing the terms and conditions of the contract is known as policy' ELEMENTS OF FIRE INSURANCE CONTRACT 1.Features of General Contract: All the features of general contract are also applicable to the fire insurance contract. [...]
[...] SCOPE FOR FIRE INSURANCE A contract of fire insurance is a contract whereby the insurer agrees, in consideration of a sum of money called premium, to compensate another person known as the insured for any loss or damage to the insured property. The contract specifies the period during which the indemnity is to last and also the maximum amount to which the insurer can be held liable. The need for fire insurance arises out of the following facts: There exists material property susceptible to damage or destruction by fire or other peril. [...]
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