Amount Mr Arnav will get from the company:

Mr Arnav insured his car for a value of Rs 100,000 in March 2019. Unfortunately, his car met with an accident and the insurance company estimated the total loss to be Rs 50,000. In this case, Mr Arnav will receive the amount that is equivalent to the estimated total loss of Rs 50,000 from the insurance company.

Principle of insurance used here:

The principle of insurance used in this case is the principle of indemnity. The principle of indemnity states that the purpose of insurance is to compensate the insured person for the actual financial loss suffered by them due to an unforeseen event. Under this principle, the insured is entitled to receive compensation up to the actual value of the loss incurred, but not more than that.

Explanation of the principle of indemnity:

1. Compensation for actual financial loss:
- The principle of indemnity ensures that the insured person is compensated for the actual financial loss suffered by them.
- In this case, Mr Arnav will receive the amount of Rs 50,000, which is the estimated total loss of his car, as compensation from the insurance company.

2. Limitation on compensation:
- The principle of indemnity imposes a limitation on the compensation that can be provided by the insurance company.
- The insured person cannot profit from the insurance claim and can only be compensated for the actual loss suffered by them.
- In this case, Mr Arnav will only receive the actual value of the loss, which is Rs 50,000, and not the initial insured value of Rs 100,000.

3. Prevention of moral hazard:
- The principle of indemnity also helps in preventing moral hazard.
- Moral hazard refers to the tendency of the insured person to take more risks or be careless because they know they will be compensated by the insurance company.
- By providing compensation based on the actual loss suffered, the principle of indemnity discourages the insured person from taking undue risks.

4. Calculation of compensation:
- In this case, the insurance company estimated the total loss of Mr Arnav's car to be Rs 50,000.
- Therefore, Mr Arnav will receive the amount of Rs 50,000 as compensation from the insurance company.

In conclusion, Mr Arnav will receive Rs 50,000 from the insurance company as compensation for the total loss of his car. This compensation is based on the principle of indemnity, which ensures that the insured person is compensated for the actual financial loss suffered by them, up to the limit of the loss.

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