Insurance Contract

Insurance may be defined as a contract between two parties of whereby one party called insurer undertakes, in exchange for a fixed sum called premiums, to pay the other party called insured a fixed amount of money on the happening of a certain event.

Since insurance is a contract, certain sections of Indian Contract Act are applicable.

Section 10 of this Act says, “All agreements are contract if they are made by free consent of the parties, competent to contract, for a lawful consideration and with a lawful object and which are not hereby declared to be void.”

The insurance contract involves :
(a) the elements of general contract, and
(b) the element of special contract relating to insurance.

The special contract of insurance involves principles:

  1. Insurable Interest
  2. Utmost Good Faith
  3. Indemnity
  4. Subrogation
  5. Warranties
  6. Proximate Cause
  7. Assignment and Nomination
  8. Return of Premium

So, in total, there are eight elements of insurance contract.