ECONOMICS
INSURANCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Generate profit for the insured
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Transfer risk from the insured to the insurer
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Restore the insured to the same financial or economic condition existing prior to loss
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To guarantee a desired outcome
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Detailed explanation-1: -The purpose of the indemnity principle is to set back the insured at the same financial position as he was before the loss occurred. Principle of indemnity is observed strictly for property insurance and not applicable for the life insurance contract.
Detailed explanation-2: -The Principle of Indemnity Indemnity is a guarantee to restore the insured to the position he or she was in before the uncertain incident that caused a loss for the insured. The insurer (provider) compensates the insured (policyholder).
Detailed explanation-3: -compensation sufficient to place the insured in the same financial position after a loss as he enjoyed immediately before the loss occurred.” Indemnity thus prevents the insured from recovering more than the amount of his pecuniary loss.
Detailed explanation-4: -Restoring an insured to the same condition as before a loss is an example of the principle of: One party is restored to the same financial position the party was in before the loss occurred.
Detailed explanation-5: -Reinstatement Provision This provision allows a policy to be reinstated if for some reason the policy has lapsed.