Business Services-1 — OCM STD 11 Commerce — Question
Gujarat BoardEnglish MediumSTD 11 CommerceOCMBusiness Services-15 Marks
Question
“Insurance contract is a special type of contract” - Explain.
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Answer
Introduction :
Natural and man – made risks are association witg hu,am life and trade and commerce.
Whatever care we take, fire, earthquake, cyclone, heavy rainfall flood etc. risks can not be avoided.
It causes the risk of life and large scale economic loss. Insurance contract differs from general contract.
`What is general (legal ) contract ? :
When two parties in exchange of financial consideration to perform or not to perform any assignment freely give written promise or guarantee is called a legal contract.
What is Insurance contract ?
“Insurance is a written contact between two parties, among which the party who takes insurance and give certain amount of money as premium to another party (Insurance company ) and against it, insurance company gives a promise to reply the losses incurred during a specific stipulated time.
This written document of Insurance Contract is called ‘ Insurance policy’
As per above definition insurance contract is a legal contact like other contract. .
How is insurance contract a special contract ? :
There are all characteristics of legal contract in insurance contract. Such as
$(1)$ two parties $(2)$ premium $(3)$ promise $(4)$ written contract. $(5) $Fees consent. Besides this both the parties under insurance contract have to observe the following principles.
So insurance contract is called a special contract.
$(1)$ principle of utmost good faith. $(2)$ principle of indemnity. $(3)$ principle of insurance interest. $(4)$ principle of subrogation.
Above mentioned principles of contract do not apply to other general contracts. Moe over in insurance contract subject to terms and conditions, the amount of insurance and time limit can be changed and insurance contract can be renewed .
That is why it is a special type of contract.
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