Question

"Insurance is a contract of indemnity." Explain.

Answer 1

1. Insurance contracts require the insurer to pay the actual loss or the sum covered, whichever is less.
2. Insurance aims to restore the insured's pre-loss situation.
3. All insurance contracts, save for life insurance, are indemnity contracts.
4. Life insurance does not follow the principle of indemnity (compensation).
5. Human life cannot be valued in monetary terms.
6. In life insurance, the money insured is always payable at death or the expiration of the set period, whichever occurs first.
7. Only the payment time is unpredictable. That is why life insurance is referred to as life assurance.