Events is life are uncertain. Anything might happen any time. Good and bad are common in an individuals' life. Accidents and death may occur or any losses to ones property might occur anytime and that is totally uncertain. There are risks in everyday life and they give insecurity. To overcome the insecurity and stay away from risks, the concept called Insurance has come into being. The Insurance is just to reduce or eliminate the loss but not to avert any damage that happen which is uncertain.
Many people fear and feel insecure when they think about any uncertain risks. They all come together and pool a part of their resource to insure their belongings from heavy loss or damage. When damage occur, the loss is spread over a large number of people. And hence the principle behind the concept of Insurance is pooling of risks.
In Contract of Insurance a person, in consideration of an agreed amount, promises to make good the loss of the person who agrees the contract of insurance with the former. The loss could be any accident or death, etc.
Insurer and Insured in Insurance ContractThe person who agrees to compensate the loss in consideration of a sum of money is called the Insurer. The person whose loss is compensated or made good is called the insured. Insured is also called assured. Insurer is also called assurer or underwriter.
Premium in Insurance ContractThe sum of amount taken by the insurer to compensate the loss of the insured is called the premium amount. The premium may be a single payment or it may be a periodical payment.
Policy in Insurance ContractPolicy is an instrument in which the Insurance contract is embodied. Policy is the evidence of the contract but not the contract.
Subject-matter of Insurance ContractThe insured thing or the insured property is called as the subject-matter.
Insurable interest in Insurance ContractThe insured must have an interest on the subject-matter on which he is insuring, that is called the insurable interest.
The idea behind the Insurance is to socialize the responsibility. This was initially discarded claiming that it was similar or was same as wagering and gambling contracts. It was so decided in Carter V. Boehm case in the year 1765 too. However, subsequently, the Insurance contract was recognized as a separate contract from the wagering contract. The insurance was explained as a system that emerged to spread the risk which is too heavy for a single individual to bear. It can be concluded that Insurance contract is not a wagering contract.