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Principal of Contribution - Insurance Contract, Principles of Insurance Video Lecture | Principles of Insurance - B Com

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FAQs on Principal of Contribution - Insurance Contract, Principles of Insurance Video Lecture - Principles of Insurance - B Com

1. What is the principle of contribution in an insurance contract?
Ans. The principle of contribution in an insurance contract states that if a person has multiple insurance policies covering the same risk, they can claim the compensation from any of the insurance policies. However, the total amount claimed cannot exceed the actual loss suffered.
2. How does the principle of contribution work in an insurance contract?
Ans. The principle of contribution works by ensuring that the insured does not profit from an insurance claim. If the insured has multiple insurance policies covering the same risk, they can choose to claim from any of the policies. The insurance company from which the claim is made will pay a portion of the claim based on the proportion of the total coverage it represents.
3. Can the insured claim the full amount from each insurance policy under the principle of contribution?
Ans. No, the insured cannot claim the full amount from each insurance policy under the principle of contribution. The total amount claimed cannot exceed the actual loss suffered. If the insured tries to claim the full amount from each policy, it would result in overcompensation, which goes against the principle of indemnity in insurance.
4. What happens if the insured claims the full amount from one insurance policy without considering the principle of contribution?
Ans. If the insured claims the full amount from one insurance policy without considering the principle of contribution, it would lead to overcompensation. This means that the insured would receive more than the actual loss suffered. Insurance companies may reject such claims or only pay a partial amount, considering the principle of contribution and preventing any unjust enrichment for the insured.
5. How does the principle of contribution protect the insurance industry?
Ans. The principle of contribution protects the insurance industry by preventing fraudulent claims and ensuring fairness in compensation. By limiting the insured's total claim amount to the actual loss suffered, it discourages individuals from taking out multiple insurance policies with the intent of profiting from a claim. This helps maintain the overall stability and sustainability of the insurance industry.
49 videos|51 docs|14 tests
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