ECONOMICS
INSURANCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Life insurance policies are subject to the principle indemnity whereas general insurance policies are not.
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General insurance policies are subject to the principle of indemnity whereas life insurance policies are not.
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Life insurance policies and general insurance policies will both pay when a person suffers permanent disablement due to an accident.
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Life assurance is a long-term contract whereas general insurance is a yearly renewable contract.
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Detailed explanation-1: -The principle of indemnity does not apply to Life and Personal Accident insurance.
Detailed explanation-2: -Life insurance does not relate to a contract of indemnity because the insurer does not promise to indemnify the insured for any loss on maturity or death of the insured but agrees to pay a sum assured in that case.
Detailed explanation-3: -Maximization of Profit is not the principle of insurance. There are seven basic principles that create an insurance contract between the insured and the insurer: Utmost Good Faith, Insurable Interest, Proximate Cause, Indemnity, Subrogation, Contribution and Loss Minimization.
Detailed explanation-4: -The principle of indemnity is not applicable to life insurance because the insurer may pay any amount but the insured cannot be brought back to the same state. Also, the loss of a life is not measurable and no money can indemnify the loss of a life.