What is premium?
The consideration payable by the insured person to the insurer is called the Premium. Usually the consideration is a sum of money. The time of payment depends upon agreement . It may be made monthly, quarterly, annually or by a single lump sum.
What is the days of grace?
The days of grace is the extra time given by the insurer to the insured for the payment of the premium.
Ordinarily a policy lapses if the premium due is not paid within the due time plus the grace period. But after policy acquires a surrender value non-payment of premium does not involve lapse of the policy.
The amount of premium is determined by an Actuarial calculation of the risk involved.
What is cover note?
The insurer may give a written acknowledgement stating the
i)The proposal has been accepted
ii)The first premium has been received, and
iii)The regular policy will be issued later on.
The risk is covered immediately with acknowledgement. The written acknowledgement is called a cover note.
Types of insurance:
•Life insurance-has been nationalized in 1956.
•Fire insurance
•Marine insurance
•Other insurance-
a) Accident
b) Motor vehicles
c) Burglary Etc.
All other types of insurance, except life insurance is called General Insurance which has been nationalized from 1971.
Insurance and wager
In an early case of insurance, it was observed that “insurance is the contract of speculation”. But the modern view is that insurance contract is not a speculative or wagering contract. Because-
•In an insurance contract there always exists an insurable interest. In a wagering contract there is none.
•A contract of insurance is based upon good faith. In a wager there is no question of faith.
•Wagering contracts are void because they are considered to be against public policy. But insurance contract in valid contract.
Obligations of the insurer
The obligation of the insurer are determined by the terms of the contract of insurance. The obligations are as follows-
•i) Fulfillment of essential-the most important obligation of the insurer is to pay the money due on the policy upon the happening of the contingency specified in it.
•ii) Commencement of risk -the risk of insurer commences after the contract of insurance is entered into.
•iii) Causa proxima- the insurer is liable only for those losses which directly and reasonably follow from the event insured against.
Rights of Insurer
The insurer has the following rights:
1) (a) The payment of premium
2) (b) The right to contribution
3) (c) The principle of Subrogation
4) (d) No return of premiums paid.
The insurer has the following rights:
1)(a) The payment of premium- the policy holder must pay the premium according to the terms of the contract. Upon non-payment the policy lapses.
2)(b) The right to contribution- A particular property may be insured with two or more insurers against the same risk. In such cases the insurer must share the burden of payment in the proportion to the amount assured by each. If any one of the insurers pays the whole loss, he is entitled to contribute from the other insurer.
Example: A house in ensured against fire for Tk 20,000 with X and for Tk 10,000 with Y. A fire occurs and the damage is estimated at Tk 6,000. X and Y share the loss in the proportion of 20,000:10,000 i.e., 2:1, X will pay Tk 4,000 and Y will pay Tk 2,000.
The policy holder can sue both X and Y together or any of them . Suppose that he sues X and recovers from him Tk 6,000. X can claim contribution form Y to the extent Tk 2,000.
(c) The principle of subrogation-
Subrogation is a form of substitute. In marine and fire insurance contract after the policy-holder is indemnified in full, the insurer becomes entitled to the remnants of the property insured and all rights and claims which the policy-holder may have against third parties. The insurer is subrogated to the position of the insured.
The principle of subrogation applied only on payment of the whole loss. In case of partial losses the principle does not apply. The principle also does not apply in cases where the contract of insurance is not a contract of indemnity.
(d) No return of premium paid-
The supreme court has held that in case of fraud, the policy-holder can not claim the refund of the premiums paid.-Mithoolal Nayak Vs. L.I.C.
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