INSURANCE

• Insurance


  is the pooling of fortuitous losses by transfer of such risks to insurers, who agree to indemnify insureds for such losses, to provide other pecuniary benefits on their occurrence, or to render services connected with the risk.
• Insurance Code, Section 2


  A contract of insurance is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event.
• Basic Characteristics of Insurance

  Pooling of Losses, Payment of Fortuitous Losses, Risk Transfer, Indemnification
• Pooling of Losses


  the sharing of losses by the entire group and (2) prediction of future losses with some accuracy based on the law of large numbers
• Payment of Fortuitous Losses


  unforeseen and unexpected; as a result of chance; accidental and random
• Risk Transfer


  risk transfer from the insured to the insurer
• INDEMNIFICATION


  restoration to his or her approximate financial position prior to the occurrence of the loss
• True


  GENERAL RULE: if the insured has no insurable interest over the life or a property he insures, the insurance contract is considered unenforceable
• Principle of Insurable Interest


  legal right to insure arising out of a financial relationship recognized under the law, between the insured and the subject matter of insurance.
• ‘UBERRIMAE FIDES’ or PRINCIPLE OF UTMOST GOOD FAITH


  positive duty to voluntarily disclose, accurately and fully, all facts material to the risk being proposed, whether requested or not. The insurance contract is voidable at the insurer’s option if the representation is material, false and relied on by the insurer.
• PRINCIPLE OF INDEMNITY

  financial compensation in an attempt to place the insured in the same pecuniary position after the loss as enjoyed just before it. “making good the loss” EXCEPTION: Life Insurance = earning capacity + insurable value of the policy
• PRINCIPLE OF CONTRIBUTION


  right of an insurer to call upon others similarly, but not necessarily equally liable to the same insured to share the cost of an indemnity payment. ● asset is insured by a group of two or more insurance companies.
• PRINCIPLE OF proximate cause


  NOT THE LATEST, but the direct, dominant, operative and efficient cause. ● it has to be noted that while determining ‘proximate cause’ the sequence of events according to their time of occurrence is irrelevant, the deciding factor is the correct cause of loss.
• PRINCIPLE OF SUBROGATION


  is invoked when a third party is responsible for the loss.
• Purposes of subrogation

  prevents the insured from collecting twice from the same loss. used to hold the negligent person responsible for the loss. helps to hold down insurance rates.