Question

Insurance Contracts have been said to be a special form of contracts. Critically identify and evaluate the elements that account for the specialty of Insurance Contracts.(minimum 1200 words)

Answer 1

Insurance Contracts are the contracts between two parties whereby one party (insurer) undertakes for an agreed sum called premium, and to pay a fixed amount of money to the other party (insurer) on the happening of a certain event. The provisions of Contract Act are applicable for insurance contracts. But insurance contracts have an additional requirement that it must be in legal form. It should comply with the legal requirements. There are certain forms that must be used for insurance contracts.

The elements that account for the specialty of Insurance Contracts are:

1. Insurable Interest : The insured must have insurable interest on the subject matter of the insurance policy.
2. Utmost Good Faith : Insured and insurer must be of utmost good faith. Both of them must share all the material facts related to the insurance policy and subject matter
3. Indemnity : It is a promise by insurer to compensate the loss suffered by insured. That is insurer indemnifies insured.
4. Subrogation : When the insured is compensated the piece of property insured will go to insurer.
5. Warranties : It is an important condition which is to be fulfilled by the insured. It is imposed by the insurer to ensure that the risk remain same during the duration of policy
6. Proximate Cause : Insurance can be for some not for all the possible losses.
7. Assignment and Nomination : Assignment is the transfer of right or title to another party. Nomination means conferring of right to receive the amount of the policy in the event of death of policyholder.
8. Return of Premium : Terms and conditions of premium payment must be mentioned in the policy document. Premium paid once will not be refunded

These are the essential elements which makes insurance contract, a special contract.