Something About The Insurance Contracts
In business, as in private life, there are dangers and risks of every kind. The aim of all
insurance is to make provision against such dangers which beset human life and dealing. He who seeks safety, called
the insured or assured, pays a certain sum, called the premium, to the insurer or underwriter who, in consideration
of this premium, takes upon himself the risk insured against and undertakes to make good to the assured any loss
which he may sustain by reason of the named peril.
The risks which may be insured against include file, the perils of the sea (marine insurance), death (life
insurance) and accidents and burglary. In fact, nowadays the happening of practically any event may be insured
against at a premium commensurate with the risk involved. The contract of insurance is called an aleatory contract
because it depends upon an uncertain event. If such a thing happens, e.g., if the house burnt down or the ship is
standard, the insurer will pay the value of it. At first sight this would seem to be a wagering transaction, the
insurer betting with the assured that his house will not be burnt or his ship will not sink and giving him the odds
of its value against the premium. It is because of this uncertainty that Lord Mansfield described insurance as “a
contract on speculation.” But modern is that insurance contracts are not speculated or wagering
Insurance is not merely a gamble on an uncertain future. In
reality, insurance is a perfectly valid contract; for the assured is only indemnified for his loss, and
he does not gain by the happening of the event insured against; he does not make a profit of his loss.
Moreover, the assured must have an insurable interest in the subject-matter insured; while in a wager no
insurable interest is present. Therefore although it is an aleatory contract, depending upon an uncertain
event, it is not a wagering or a speculative contract nor is it merely a gamble on an uncertain
A contract of insurance is a contract based on utmost good faith and if the utmost good faith
is not observed by either party the contract may be avoided by the other.
Since insurance shifts risks from one party to another, it is essential that there must be
utmost good faith and frankness between the insured and insurer; the whole truth must be told about the
subject-matter of insurance and all circumstances surrounding it, in order that the underwriter may know the extent
of his risk and how much he must charge for the insurance of it.
The willful or innocent withholding of any relevant information is a most serious matter and the
underwriter can declare the contract void on declaring it.
Due to a rising trend towards insurance business in many countries, we can see Insurance
Lawyers very busy. Insurance lawyers in many parts of the world are earning good income. The work of Insurance
Lawyers is also not as easy as it seems to be.
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