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The Principles of Car Insurance

Submitted by sksimar01 on Tue, 04/17/2018 - 06:05

Riskin Human Life and Insurance: Human beings are exposed to risks of different degrees. Uncertainty is the only certainty in life and this is why insurance is necessary. Car insurance helps in covering subjective risk that is associated with car accidents. Risk management is a crucial part of human life. There has to be a plan to mitigate loss when it occurs.

Car insurance is one tool which helps in covering the loss caused due to car accidents. Car insurance is based on the principle of good faith and both the insurer and the insured should have good faith towards each other. The insurer must provide all the information to the insured pertaining to the terms and conditions of the contract. The principal duty of the company providing car insurance is to minimize the loss to the insured on the happening of an uncertain event.

In a car insurance, the kind of vehicle, the purpose of its use, model details and other associated details have to be provided. In a car insurance contract, there have to be all the essentials of a valid contract like proposal, acceptance, consideration, competence to contract, consensus ad idem and lawful object.

The Principles of Insurance: A Cut above the Rest:

The business of insurance is to protect the life and property of a person and for that insurance policies are drawn out. Insurance contracts are subject to certain other essentials like:

  • Principle of utmost good faith: The parties to a contract of insurance have to act in utmost good faith towards each other.
  • Principle of insurable interest: There has to be some insurable interest meaning thereby that there has to be a certain property that must be of insurable value. 
  • Principle of indemnity: This principle says that there has to be some recompense for the loss suffered by one party.
  • Principle of subrogation: This principle relates to the ownership of property. 
  • Principle of contribution: There has to be a contribution from the insured in the form of a premium.
  • Adhesion principle: This principle simply denotes that the insurer draws up the contract and presents it to the other party for taking or leaving.
  • Executory contract principle: This principle denotes that in the executory contract, the covenants of one of the parties to the contract remain unfulfilled.
  • Personal contract: Insurance contracts are more of personal in nature and same applies for a car insurance contract. 

What Does Insurance Provide For:

Any kind of insurance is based on the principle of indemnity. The main features of insurance are as follows:

  • The insurance mechanism is a tool to share the risks between the insurer and the insured on the happening of an uncertain event.
  • There is a valuation of the risk involved and this can be in any type of insurance more particularly car insurance.
  • There is a certainty of payment on the happening of an uncertain event.
  • There will be an amount of payment specified according to the premium amount fixed.
  • Insurance is an enforceable and legal contract between the insurer and the insured.
  • The insurance contract is based on mutual good faith between the insurer and the insured.

Car Insurance Claims: A Technical Aspect:

In car insurance claims, the insured has to submit the claim form and the relevant documents. There has to be a surveyor appointed in cases of insurance. The car insurance company collects information on the car to be insured and suggests an amount which is to be paid as a premium. The age of the car definitely affects the rate of insurance.

Moreover which company has made your car affects the cost of car insurance. The driving record is another factor which has to be taken into account. Car insurance helps in repairing of a vehicle after an accident. For a car insurance to operate, there has to be the cooperation between the insurer and the insured, there has to be some insurable interest, the parties have to be in good faith to each other, there are warranties and representations given to each other amongst the parties, and most importantly there is the principle of indemnity.

Probability is another factor that determines car insurance and it is to be noted that the quantum of risk and the probability of risk are two important factors that have to be taken into account when determining the boundaries of renew car insurance policy. Car insurance is an essential element of today’s world due to the strict law governing it. According to section 24 of the Motor Vehicles Act in India, it is mandatory for a person to use a motor vehicle in a public place only if it is covered by a policy of insurance. Therefore, car insurance is a necessary tool to prevent human beings from uncertain events.