Questionn 4

(a)

Difference Express and implied condition of insurances policy, express conditions which actually
appear in the policy document. Examples, Claim condition and cancellation condition which can
be found in the policy. While Implied conditions are conditions which the law reads into any
contract of insurance but which do not appear in the contract.

(b)

There are six principle of insurance which are insurable interest , utmost good faith,
proximate cause, contribution, subrogation and indemnity. Insurable Interest can be defined as
the right to insure arising out of legally recognized financial interest which a person has in the
subject matter of insurance. In general, insurable interest must exist at the time of inception of the
insurance contract and the time of loss for all classes of insurance.
Second, the duty of utmost good faith is a positive duty (of the insured) to disclose fully
and the accurately all material facts that he (the insured) knows or ought to know, whether asked
for or not (by the insurer). The duty to disclose material facts lasts until the completion of the
insurance contract.
Third, Proximate Cause. Proximate cause means the active efficient cause that sets in
motion a train of events which brings about a result, without the intervention of any force started
and working from a new and independent source. The proximate cause of his death was the
stranger disease while the accident and injury were the remote causes.
Principle of indemnity which insurance contracts a promise to make good the loss or
damage. The object of the principle is to ensure that insured after being indemnified shall be
either better nor worse off than before the loss. The effect of the principle is to prevent the insured
from making a profit out of loss. There are four method of indemnity use by insurers which are
cash, repair, replacement and reinstatement.
Subrogration in the context of insurance can be defined as taking the right belonging to
an insured by the insurer after the latter has indemnified the insured. The rights belonging to the
insured may include those right against third parties who are also liable for the loss which is the
subject of the claim and the right of the insured in the salvage.
Lastly is contribution can be defined as the amount which each insurer has to contribute
to the cost of a loss is covered by two or more insurers. According to the principle of
contribution, an insurer who has indemnified the insurers may call upon the other insurers who
are similarly liable for the loss to contribute towards the payment of indemnity.

(C)

Policies that pay more than indemnity are reinstatement policies, agreed additional costs
and valued policies. Reinstatement policies in fire insurances, it is possible to arrange policies on
building and machinery which will pay the cost of reinstating or replacing damage premises and
machines, without making any deduction for wear and tear.
Agreed additional costs in fire insurances the insured may incur additional costs as a
result of a fire. Example, cost of removal of debris, architects and surveyors fees, etc. These
costs can be included in the cover and any payment for these costs by the insurer will amount to
more than indemnity.
Valued policies may be defined as a policy in which the insured and the insurer agreed at
the inception that the sum insured will present the value of the property and that this amount will
be payable in the event of a total loss irrespective of the value of the property at the time of loss.
Example of such policies can be found in marine insurance.