1. Chapter3
Fundamental principles of insurance law

2. Insurance contract Premium (consideration)
Insurer Insured/Assured (Proponent)
Promise of payment by the insurer
The proposal is the offer.
The policy is evidence of the contract.
Copyright © 2000 McGraw-Hill Australia

3. insurance insurance is an important aid of trade.
there are various risks of losses in trade activities these losses are caused by fire accidents, theft, storms, explosion, and other calamities.
such risks are predictable and these losses can be insured.
A contract of insurance is a contract under which the insurer agrees to accept a risk against a specific payment .
The insurance is based on the principle of ‘pooling of risks’.

4. insurance Insurance and assurance:
The term insurance refers to events or incidents which may or may not occur, e.g.: fire, theft, accidents and the like.
Assurance on the other hand refers to incidents which are bound to or that must happen, for example, death, and old age.

5. insurance
Insurance is the equitable transfer of the risk of a loss from one entity to another in exchange for payment.
It is a form of risk management primarily used to hedge against the risk of uncertain loss.
An insurer is a company selling the insurance.
The insured is the person or entity buying the insurance policy.

6. Continue….
The amount of money to be charged for a certain insurance is called the premium.
Risk management is the practice of appraising and controlling risk that has evolved as a discrete field of study and practice.
The transaction involves the payment to the insurer in exchange for the insurer’s promise to compensate the insured in the case of financial loss.

7. Continued…..
The insured receives a contract called the insurance policy which details the conditions and circumstances under which the insured will be financially compensated.
The insurance involves pooling funds from many insured entities to pay for the losses that some may incur .

8. Continued….. Types of insurance: A) life insurance:
a contract of life insurance is a contract where by the insurer in consideration of a certain premium, undertakes to pay to the assignee of the assured in case of his death.
B) marine insurance: various kinds of marine policies are as follows:

9. cont
voyage policy : this is were the owner of a ship insures it for a particular journey.
Time policy: this covers losses that may occur within a specified period say Tuesday the 1st January to Tuesday 31decembber,2015.
Time policies do not usually exceed one year.

10. continued
Floating policy: this covers losses on a particular route for a specified period.
port policy: this policy covers the vessel for a period of time while in port.

11. continued
c)theft insurance: this insurance covers losses caused by thieves and robbers. d)bad debts insurance : bad debts insurance protects traders against losses caused by failure of their customers to pay their debts.

12. Continued…
In order to be insurable risk ,the risk insured against must meet certain characteristics like:
a) Large loss b) calculable loss c) Accidental loss
individual entities can also self-insured through saving money for possible future loss.

13. Insurance in legal perspective
When a company insures an individual entity there are basic legal requirements.
Legal principles of insured include:
Indemnity: The insurance company indemnifies or compensates the insured in the case of certain losses.

14. Continued….
Insurable interest: The insured typically must directly from the loss . Insurable interest must exist whether property insurance or insurance on a person is involved.
Utmost good faith : The insured and the insurer are bound by a good faith bond and honesty. Material facts should be disclosed.

15. Utmost good faith Duty of disclosure:
Non-disclosure of a material fact may result in a voidance of the contract.
NON-DISCLOSURE
INNOCENT FRAUDULENT
 Limitation of  Contract void
liability
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16. Continued….
Causa proxima(proximate causes):The cause of loss must be covered under the insuring agreement of the policy.
Mitigation: In cause of any loss or casualty the asset owner must attempt to keep loss to a minimum as if the asset was not insured.

17. Doctrine of privity of contract
Only the parties to a contract can receive rights and obligations pursuant to the contract, i.e. only the parties to a contract can sue or be sued with respect to the contract.
Copyright © 2000 McGraw-Hill Australia

18. Renewal insurance cover
Insurer must notify the insured in writing within fourteen (14) days before the cover expires.
Copyright © 2000 McGraw-Hill Australia