Principles of

Insurance
Continued…….
 Principles
to discuss…

Insurale
Interest

Arbitration

Average
What is
Insurable
Interest? #
A person has an insurable
interest in something when loss
or damage to it would cause
that person to suffer a financial
loss or certain other kinds of
losses.
WHO HAS INSURABLE
INTEREST?
IN MY
HOME?
# The House-
Owner
# The House
Members
 Nature of Insurable
Interest
According to According to statutory
common law provisions
 Insurable Interest at
1. There must Common
be a “thing” capable ofLaw
being
affected by #risks.
It must not be imaginary
# It must exist at the time of application
 Insurable Interest at
1. There mustCommon Law
be a “thing” capable of being
affected by risks.
2. The thing# must
relation be the policy
between subject matter of the
and “thing”
insurance.
 Insurable Interest at
1. There mustCommon Law
be a “thing” capable of being affected by
risks.
2. The thing must be the subject matter of the insurance.
3. There must be a legally recognised relationship between
the person and the
# relationship “thing”.
created by law or is legally acknowledged
 Insurable Interest at
1. There mustCommon Law
be a “thing” capable of being affected by
risks.
2. The thing must be the subject matter of the insurance.
3. There must be a legally recognised relationship between
the person and the “thing”.
4. The person is financially prejudiced if the “thing” is
affected by risks.

Husban Wife
d
Statutory Insurable Interest
Insurable Interest exists without the
essentials.
In case of prescribed relationships
# Husband - Wife
# Hirer – Financier
 WHEN DOES IT EXIST?

General Insurance – At the time of

Application and Loss
Life Insurance – At the time of Application
 Insurable Interest in Life
Insurance
One’s own life Other‘s life

Proof NOT Proof required

required
Creditor
Husband → Wife
Family
Wife → Husband
Relationship
Business
Relationship
 Circumstances
1. Father on the life of his son(minor)
2. Son on the life of Father
3. Employer on the life of employee
4. Partner on the life of another
Partner
5. Uncle on the life of nephew.
6. Brother on the Life of
brother/sister.
AVERA CLAU
GE SE
 DEFINITI
ON
This is the clause in Insurance Policy
which
• restricts the amount payable
• to the sum not exceed the value of
property destroyed
• and that bears the same proportion to
the loss
• as the face of the policy does the
 CONDITIO
NS
1) Pro-rated condition of
average
2) Special condition of
average
3) Two-rated condition of
average
 FORMULA

INSURE
DTOTAL
VALUE
x LOSS
SUFFER
VALUE ED
 EXAMPLE
House Worth = 1
crore
Insured for = 50
Lacs
INSURED
Damage
VALUE
TOTAL
= x LOSS
25
Lacs
VALUE SUFFERED
50
X 25 = 12.5
Lacs
1
Lacs Lacs
crore
THANKS
HAVE A NICE DAY !