Non-indemnity contracts include life insurance and most personal accident insurance policies. You can buy a $1 million life insurance policy, but it doesn’t mean your life is worth that much. An indemnification contract isn’t applicable because you can’t assess your life’s net worth and put a price on it.
Which insurance policy is not a contract of indemnity?
A contract of indemnification differs from life insurance in that life insurance is a contract of guarantee rather than indemnity. However, only a small percentage of the population is aware of this. Below are some pointers that emphasize the differences to help you comprehend them better.
- Indemnity and life insurance policies both provide compensation for losses to the insured party in exchange for premiums up to a certain amount. When an insured person dies, however, life insurance pays a lump-sum payment to the selected beneficiaries. Unlike a contract of indemnity, the payout, known as a death benefit, is for the whole policynot just the amount of a claim.
- In general, fire and marine insurance contracts are indemnity contracts; that is, they provide for the payment of the insured for any loss or damage caused. However, life insurance creates an exception to the general norm.
- Life insurance is simply a contract to pay a specified sum of money upon the death (or maturity) of a person, with the payment of a specified sum of money at regular intervals. The insured simply pays the premium to ensure that a particular quantity will be paid to him or his representatives in the event of his deathmoney that will be paid at regular intervals.
- Because the insurer does not commit to indemnify the insured for any loss on maturity or death, life insurance is not a contract of indemnity. Instead, the insurer agrees to pay an amount promised in that case. A life insurance policy is not an indemnity because it is just a contract to pay a set sum, known as the Sum Assured, in the event of death.
The insured pays the premium to the insurer in order to ensure that a specific amount will be paid to him or his representatives in the event of his death. There is no inquisition of indemnity in such a case, because the loss caused by death cannot be quantified in monetary terms. Life insurance is chosen as a means of saving because it is unfamiliar with the concept of indemnification.
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Which insurance is a contract of indemnity?
Except for life assurance, every contract of insurance is a contract of indemnification and nothing more. The term indemnification has a far broader connotation in English law than it does in the Indian Act. A contract of insurance (other than life insurance) is a contract of indemnification under English law.
Which type of loss are not covered by a contract of indemnity?
The main requirements for a contract of indemnification are two parties and an agreement between them in which the promisor commits to protect the promisee against any loss. The most crucial part of the indemnity contract is this. The loss could have been caused by the promisor’s or another third party’s actions. The rules of the Act confine the loss to human agency exclusively, and an act of God is not covered by the indemnification contract. Marine insurance, fire insurance, and other indemnity contracts are examples.
Indemnity contracts might be express or implied. The meaning of indemnification in Section 124 does not apply to implied indemnity contracts.
Which is not a type of general insurance?
There is a difference between two sorts of insurance: life insurance and non-life or general insurance. You will be insured under the Life insurance policy as an individual.
In the event of death or policy maturity, the insurance’s reimbursement can be withdrawn.
A General Insurance Policy, on the other hand, will only compensate for damages that occur during the policy period.
Is liability insurance a contract of indemnity?
Liability insurance policies are agreements between the insurer and the insured. The policy conditions must be the starting point in deciding whether or not the insured is entitled to indemnity for a potential third-party obligation.
Is Marine insurance A contract of indemnity?
The essential principles of Marine Insurance are extracted from the Marine Insurance Act of 1963*, as are the fundamental principles of Indemnity, Insurable Interest, Utmost Good Faith, Proximate Cause, Subrogation, and Contribution in all property insurance contracts. When negotiating contracts and settling claims under contracts, marine insurance practitioners must be familiar with the Act and uphold these Principles.
The goal of an insurance contract is to put the insured in the same relative financial position that he would have been in if the loss had not occurred.
The indemnity given by the Marine Insurance Act is “in the agreed-upon method and to the agreed-upon extent.” A+ “As a result, a “commercial” indemnity is granted. Because insurers cannot guarantee that cargo will be reinstated or replaced in the event of loss or damage, they pay a pre-agreed quantity of money to give adequate compensation. In reality, this is accomplished by agreeing on the insured value in advance, based on the CIF value of the goods, to which it is typical to add a ten percent margin to cover general overheads and possibly a profit margin on the transaction.
The sum insured is paid in full if the entire cargo is destroyed by an insured risk, and if just a portion of the cargo is destroyed, the corresponding proportion of the insured value is paid.
Damage claims are resolved by calculating the percentage of depreciation and multiplying it by the insured value. The percentage of depreciation is determined by comparing the value of the products in their damaged state to their gross sound value on the selling date. To avoid distortion of the result due to market price movements, both values are calculated on the same date.
It is common practice in the marine insurance industry to provide policies with an agreed value. Except in the case of an inadvertent error or when fraud is asserted, the agreed value is conclusive between the Insurer and the Assured.
Policies such as “Duty” and “Increased Value” are not agreed-upon value policies. They solely provide pure indemnification.
Insurable interest is defined quite clearly under the Marine Insurance Act. It stipulates that there must be a physical thing exposed to marine perils, and that the insured must have some legal relationship to the object, as a result of which he benefits from its preservation and is harmed by its loss or damage, or where he may be liable in relation to it.
In the case of fire and accident insurance, an insurable interest must exist at the time of the policy’s creation.
contract and at the time of loss, the interest in a marine contract must exist at the time of loss, even if it did not exist at the time the insurance was effected. This is crucial when considering the commercial practice, which allows for the sale and purchase of items while in transit. The MIA, on the other hand, has stipulated that where the goods are insured, “Unless he was aware of the loss at the time of obtaining insurance and the insurer was not, the assured may recover the loss, even if he did not acquire his interest until after the loss. If the assured has no interest at the time of the loss, he cannot acquire interest after learning of the loss through any act or election. As a result, a contingent as well as a defeasible interest is insurable. It is also possible to insure a partial stake.
A marine cargo policy is freely assignable either before or after loss, unless the assignee has acquired insurable interest, as is the case with standard indemnity policies in other classes of insurance.
The Insurable Interest is also determined by the type of sale contract. The most typical contract terms, known as clauses, have been given their own chapter “Terms of Inco”. The contract’s conditions specify which of the two parties is liable for insuring the products.
Every insurance contract is a contract “uberrimae fidei,” which means that both the insurer and the assured must behave in good faith. In Marine Insurance, it is the proposer’s responsibility to disclose all material details about the risk in a clear and correct manner. A material fact is one that would influence a sensible Underwriter’s decision on whether to enter into a contract at all, or whether to enter into it at one rate of premium or another, and on what terms. Aside from the responsibility of disclosure, the insured must act in good faith toward the insurer during the contract’s lifetime.
Non-disclosure, concealment, innocent misrepresentation, and fraudulent misrepresentation are the four categories used to characterize violations of the duty of utmost good faith. The first two are referred to as passive breaches, while the third and fourth are referred to as aggressive breaches. The Marine Insurance Act requires the assured to communicate to the insurer all material circumstances that he is aware of or should be aware of in the ordinary course of his business.
Although deliberate and material non-disclosure would normally amount to fraud and render the insurance worthless, the result is the same whether the non-disclosure is intentional or inadvertent, and the policy may be avoided.
Overvaluation, for example, must be disclosed to insurers; if it is not, it is considered a concealment of a material fact, and the insurance is voided.
“Proximate cause is defined as “an active, efficient cause that puts in motion a series of events that leads to a result without the intervention of any force that has been begun and is actively operating from a new and independent source.”
If an insured danger is the proximate cause of the loss, insurers are liable. The insurers are not liable if an insured risk is just a distant cause of the loss, with the proximate cause being an uninsured or excluded peril.
The proximate cause is not necessarily the one that is closest in time, but it is the one that is closest in efficiency. It is the primary, effective, and operational reason for the loss.
- a) If an insured risk is one of the factors contributing to the loss and no exempted peril is present, the loss is covered.
- b) If one of the causes is an excluded peril, the loss is not covered at all, unless the insured peril’s effects can be distinguished from the uninsured peril’s, in which case the former is covered but not the latter.
“Subrogation is the right of one person to act in the place of another and claim all of the other’s rights and remedies, whether or not they have been enforced.”
Subrogation is a corollary of the indemnity concept, hence the right of subrogation only applies to insurance, which are indemnity contracts. Subrogation is a question of equity, with the goal of ensuring that the insured is not over-insured for the same loss.
1i) He has the right to assume the assured’s interest in whatever remains of the subject-matter so paid for (abandonment);
1.ii) and, as of the time of the loss, he is subrogated to all of the assured’s rights and remedies (subrogation)
(b) When an insurer pays for a partial loss, he does not gain title to the subject-matter insured or to any part of it that may remain, but he does become subrogated to all of the assured’s rights and remedies as of the time of the loss and in the amount that the assured has been compensated.
Subrogation arises only after a loss has been paid in the case of marine insurance. In terms of rights and remedies, the insurer is only allowed to recover up to the amount he has paid.
The insurer has the right to assume ownership of the subject-matter insured upon payment of a total loss. The right is granted to him by abandonment (rather than by rights of subrogation), and it means that if the property is later salvaged or recovered, the insurer is entitled to keep the entire proceeds of sale, even if they exceed the amount paid out under the policy, as long as the property is fully insured and the assured was not bearing part of the risk himself.
The insurer is subrogated to the right to exercise ownership of the property in addition to this right “all assured’s rights and remedies” as of the time of the loss-causing casualty This simply means that if the loss was caused by the carelessness of a third party against whom the assured has a tort claim such as a carrier or bailee – the Insurer is entitled to any recovery (which reduces the loss) that the assured may obtain against such third party. This notion applies to both whole and partial losses and has nothing to do with the abandonment doctrine.
Multiple insurers may cover the same risk at the same time. In that circumstance, it is preferable to ensure not only that the insured receives no more than an indemnity, but also that any loss is equitably distributed among all of the insurers concerned. The principle of contribution is a means of equitably dividing the weight of claims among insurers for which everyone bears some obligation.
Before a loss is split among insurers, the following conditions must be met.
A marine insurance contract is an arrangement in which the insurer agrees to indemnify the insured in the way and to the extent agreed upon against transit losses and losses incurred during transit. A marine insurance policy may be extended to protect the insured against losses on inland waters or any land risk that may arise as a result of a sea voyage, either expressly or by usage of trade. In layman’s terms, maritime insurance entails
- A) Cargo insurance, which covers the loss or damage of commodities while they are being transported by train, road, sea, air, or post. As a result, cargo insurance is concerned with the following:
- B) Hull insurance, which deals with the protection of ships’ hulls (hull, machinery, etc.). This is a very technical topic that will not be covered in this module. Simply put, Hull Insurance is the element of maritime insurance that deals with the insurance of ships, barges, boats, and offshore facilities.
Any contract must include an offer and acceptance clause. Similarly, after the insurance firm accepts the offer, the commodities covered by marine (transit) insurance will be insured.
2) Premium payment: To ensure that the risk is covered, an owner must ensure that the premium is paid well in advance.
3)Contract of Indemnity: Marine insurance is a contract of indemnity, which means that the insurance provider is only responsible for the actual loss suffered.
4) Absolute good faith: When insuring things, the owner of the goods must provide the insurance provider with all essential information.
5) Insurable Interest: If the person has an insurable interest at the time of the loss, the marine insurance will be legitimate.
6) Contribution: If a person covers his products with two insurance firms, both insurance companies will pay the loss proportionately to the owner in the event of a marine loss.
7)Marine Insurance Period: The policy’s insurance period is for the amount of time it takes to complete a transit. In most cases, open maritime insurance will last no longer than a year.
8) Purposeful Act: If products are damaged or lost during transit as a result of an owner’s deliberate act, the damage or loss is not covered by the policy.
9) Claims: In order to receive compensation under marine insurance, the owner must notify the insurance company as soon as possible so that the insurance company can determine the loss.
MARINE INSURANCE OPERATIONS Marine insurance is extremely significant in both domestic and international trade. Most sales contracts provide that the items must be insured against loss or damage, either by the vendor or the buyer.
The seller is accountable for the items until they are loaded onto the steamer (F.O.B. contract). Following that, the buyer is accountable. He is free to get his insurance done wherever he wants.
Rail travel is free. The provisions are the same as in the preceding (F.O.R. Contract). Internal transactions are primarily affected by this.
Freight and Cost When the items are loaded into the ship, the buyer’s liability (C&F Contract) usually kicks in. From that point on, he must be responsible for the insurance.
Insurance, Cost & The seller is responsible for arranging insurance up to the (C.I.F. Contract) destination in this situation. In the sale invoice, he includes the premium charge as part of the cost of products.
In regular export/import trade, the exporter will ask the importer to open a letter of credit in the exporter’s favor with a bank.
The letter of credit specifies the insurance terms and conditions. The Institute Cargo Clauses (I.C.C.) are utilized for export/import policies. The Institute of London Underwriters (ILU) created these clauses, which are used by insurance companies in most countries, including India.
- a) Specific voyage policy: A specific journey policy addresses the transportation of commodities via inland transportation, as well as import and export to specific locations.
- b) Open policy/Open cover: An open policy or an open cover is a promise to cover all shipments/transits made during the year. At the outset, the insurer will only have general information about the cargoes, the expected total insured, the journeys, and the quality of the boats to be employed. For each shipment, specific information is provided in the sequence of dispatch or in the form of periodic declarations.
- c) Sales Turnover Policy (Annual) In India, an annual sales turnover policy has gained a lot of traction. This is similar to an open policy with the exception that the premium rate is based solely on sales turnover (and any other components not covered by the term “sales turnover”). In some companies, it’s also called as Sales Turnover Policy (STOP) or Annual Turnover Policy (ATP).
- d) “Obligation” Insurance According to the Customs Act, cargo imported into India is subject to Customs Duty. This obligation can be included in the value of the cargo insured under a Marine Cargo Policy, or it can be covered by a separate policy, in which case the Duty Insurance Clause is included.
- e) Buyer’s or Seller’s Contingency Insurance: This policy covers the assured’s contingent financial interest in any items where the assured has no obligation to insure under the Terms of Sale or where the coverage supplied is more restrictive than that provided under this policy.
ii)Normal leakage, normal weight or volume loss, or normal wear and tear These are typical ‘trade’ losses that are unavoidable and not by chance.
iii. Loss due to a “inherent vice” or the subject matter’s nature. Perishable goods such as fruits, vegetables, and other perishables, for example, may decay without any ‘accidental cause.’ This is referred to as “inherent vice.”
vi)Loss resulting from the vessel’s owners, operators, or other parties’ insolvency or financial default.
viii)SRCC (Strikes, riots, lock-outs, civil commotions, and terrorism) can be covered for an additional cost.
Hull insurance covers the vessel and its equipment. There are several types of vessels, such as ocean steamers, sailing vessels, builders, hazards fleet policies, and so on.
It covers the hull and machinery of ocean-going and other vessels such as barges, tankers, fishing boats, and sailing yachts.
The increase of insurance of offshore oil/gas exploration and production units, as well as related construction risks, is a recent development in hull insurance.
It is covered by specific classes of enterprise, including fishing vessels, trawlers, dredgers, inland vessels, and sailing vessels.
The vessel or ship is the subject of hull insurance. Ship designs come in a variety of shapes and sizes. The majority of them are made of steel and welded together, and they can travel on the sea in ballast with cargo.
The ship will be measured in GRT (Gross Register Tonnage) and NRT (Net Register Tonnage) (Net Register Tonnage). GRT is computed by dividing the volume of the ship’s hull below the tonnage dock, plus all compartments above the deck with permanent means of closure, by the volume of the ship’s hull in cubic feet.
NRT stands for gross tonnage minus certain spines for machinery, crew accommodations, and ballast spaces, and is meant to cover just those spinnings that are used for cargo carriage.
The capacity in tons of cargo required to load a ship to her load line level is referred to as DWT (Dead Weight Tonnage).
There are two types of tonnage: ocean going and coastal tonnage. The size of ocean-going general cargo vessels ranges from 5000 to 15000 GRT, while coasters are smaller and are used to transport bulk cargoes.
Container ships, large carriers (LASH Lighter Abroad Ship), and Ro-Ro (Roll on Roll off) vessels are examples of general cargo vessels (Refrigerated Vessels General Cargo)
Dry Bulk Carriers are specially built vessels that range in size from thousands of GRT for coasters to 70,000 GRT for ocean-going tonnage. Iron ore, coal, grain, bauxite, and phosphate are the most common bulk cargoes handled.
Tankers are built to transport large amounts of liquid. Tankers have been employing tanks that do not stretch the entire length of the tanker.
Cruise ships or passenger liners travel to far-flung locations with scenically lovely but rocky or shallow beaches, or near the cold waters of the Arctic and Antarctic. They are equipped with modem navigational systems.
There are also fishing vessels, offshore oil vessels, and other types of vessels.
The geographic/physical characteristics of the area of operations range from relatively sheltered inshore fishing areas to the full rigors of the open seas, including gales, strong seas, fog, ice, and snow.
Offshore oil vessels are used for demonstrations or commercial oil extraction from the ocean floor.
The coverage covers the hull, machinery and equipment, as well as supplies and other items on board, but not the cargo.
The insurance covers the individual ship owner’s requirements and protects him against partial and total loss, ship’s proportion of general average and salvage charges, legal and labor expenses, and ship-liability owner’s to other vessels resulting from collisions.
To ensure the risk, Hull underwriting requires the following information: Type, construction, builders, age, tonnage, dimension, equipment, propulsion machines, engine, fire extinguisher; classification society, merchant shipping act, warranties, navigation physical and moral hazard; classification society, merchant shipping act, warranties, navigation physical and moral hazard
Why is insurance called a contract of indemnity?
A contract of indemnity is a legal arrangement between two parties. In this agreement, one party commits to compensate the other for any prospective losses or damages. An insurance contract, for example, is one in which the insurer or indemnitor agrees to compensate the other (the insured or indemnitee) for any damages or losses in exchange for premiums paid to the insurer. The insurer indemnifies the policyholder by promising to make the individual or business whole in the event of a covered loss.