B Com Exam > B Com Videos > Principles of Insurance > Principle of Indemnity - Insurance Contract, Principles of Insurance
Principle of Indemnity - Insurance Contract, Principles of Insurance Video Lecture | Principles of Insurance - B Com
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FAQs on Principle of Indemnity - Insurance Contract, Principles of Insurance Video Lecture - Principles of Insurance - B Com
| 1. What is the principle of indemnity in an insurance contract? |  |
Ans. The principle of indemnity in an insurance contract states that the insured should be compensated for the actual financial loss suffered, but not more than that. It ensures that the insured is restored to the same financial position as before the loss occurred. This principle prevents the insured from making a profit from the insurance policy.
| 2. How does the principle of indemnity work in an insurance contract? | |
Ans. The principle of indemnity works by determining the value of the loss or damage suffered by the insured. The insurer will assess the actual cost of the loss or damage and provide compensation based on this value. The compensation may be in the form of repair, replacement, or cash payment, but it will not exceed the actual financial loss incurred by the insured.
| 3. Are there any exceptions to the principle of indemnity in an insurance contract? | |
Ans. Yes, there are certain exceptions to the principle of indemnity. One common exception is the concept of "new for old" or "replacement cost" coverage. Under this exception, the insurer may provide compensation for the full cost of replacing the damaged or lost item with a new one, even if the original item was old or depreciated in value. Another exception is when the insured has a specific agreement with the insurer for an agreed value coverage, where the compensation is predetermined and not based on the actual financial loss.
| 4. What are the advantages of the principle of indemnity in an insurance contract? | |
Ans. The principle of indemnity provides several advantages in an insurance contract. Firstly, it ensures that the insured is not overcompensated for the loss or damage suffered, preventing the possibility of fraud or moral hazard. Secondly, it helps to maintain the stability of insurance premiums by basing the compensation on the actual financial loss incurred. Lastly, it promotes fairness by treating all insured parties equally and preventing any unjust enrichment.
| 5. How does the principle of indemnity differ from other principles of insurance? | |
Ans. The principle of indemnity differs from other principles of insurance, such as the principle of utmost good faith or the principle of subrogation. While the principle of indemnity focuses on the amount of compensation provided, the principle of utmost good faith emphasizes the duty of both the insured and the insurer to disclose all relevant information honestly and accurately. On the other hand, the principle of subrogation allows the insurer to take legal action against a third party responsible for the loss or damage in order to recover the compensation paid to the insured.
Text Transcript from Video
hi everyone and welcome back to basic
insurance my name is Rebecca and I am
your insurance lady and today we're
going to talk about the principle of
indemnity so the principle of indemnity
states that the insured will be
reimbursed for a loss in the form of
payment repair or replacement now
remember the insured is the customer and
the insurer is the insurance company so
to indemnify is to repay to restore and
to compensate it is not designed for
gain and it is not designed for profit
so imagine if you will it's a nice hot
sunny day and you have a tall glass of
cold water filled up to the brim you
hear thirsty so you take a big big gulp
of that water and then all of a sudden
now it's half-full or half-empty
depending on how you look at it so in
order to indemnify that cup you are
going to fill up the water to the place
it was before you took that sip so it's
going to be filled up to the brim the
principle of indemnity will not allow
your cup to run it's over
okay it's not going to happen so to
indemnify is to repay to restore and to
compensate and it's designed to restore
a policyholder to the condition he or
she enjoyed prior to the loss it is not
for gain and it is not for profit so
remember the principle of indemnity the
insured will be reimbursed for a loss in
the form of payment repair and
replacement your cup will not run it
over payment repair or replacement okay
thank you guys for listening please be
sure to subscribe I'm going to be adding
more insurance concepts to help you in
your pre licensing journey once again
my name is Rebecca and I am your
insurance lady
insurance my name is Rebecca and I am
your insurance lady and today we're
going to talk about the principle of
indemnity so the principle of indemnity
states that the insured will be
reimbursed for a loss in the form of
payment repair or replacement now
remember the insured is the customer and
the insurer is the insurance company so
to indemnify is to repay to restore and
to compensate it is not designed for
gain and it is not designed for profit
so imagine if you will it's a nice hot
sunny day and you have a tall glass of
cold water filled up to the brim you
hear thirsty so you take a big big gulp
of that water and then all of a sudden
now it's half-full or half-empty
depending on how you look at it so in
order to indemnify that cup you are
going to fill up the water to the place
it was before you took that sip so it's
going to be filled up to the brim the
principle of indemnity will not allow
your cup to run it's over
okay it's not going to happen so to
indemnify is to repay to restore and to
compensate and it's designed to restore
a policyholder to the condition he or
she enjoyed prior to the loss it is not
for gain and it is not for profit so
remember the principle of indemnity the
insured will be reimbursed for a loss in
the form of payment repair and
replacement your cup will not run it
over payment repair or replacement okay
thank you guys for listening please be
sure to subscribe I'm going to be adding
more insurance concepts to help you in
your pre licensing journey once again
my name is Rebecca and I am your
insurance lady
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Nov 23, 2024 Last updated |
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