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Insurance
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Write a note on Insurable Interest and Indemnity

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Insurable Interest: The insured

must have an insurable interest in the

subject matter of insurance. One

fundamental fact of this principle is

that ‘it is not the house, ship,

machinery, potential liability of life that

is insured, but it is the pecuniary

interest of the insured in them, which

is insured.’ Insurable interest means

some pecuniary interest in the subject

matter of the insurance contract. The

insured must have an interest in the

preservation of the thing or life insured,

so that he/she will suffer financially on

the happening of the event against

which he/she is insured. In case of

insurance of property, insurable

interest of the insured in the subject

matter of the insurance must exist at

the time of happening of the event. In

order to name insurable interest

however, it is not necessary that one

should be the owner of the property.

For example, a trustee holding

property on behalf of others has an

insurable interest in the property.

Indemnity: All insurance

contracts of fire or marine insurance

are contracts of indemnity. According

to it, the insurer undertakes to put the

insured, in the event of loss, in the same

position that he occupied immediately

before the happening of the event

insured against. In other words the

insurer undertakes to compensate the

insured for the loss caused to him/her

due to damage or destruction of

property insured. The compensation

payable and the loss suffered are to be

measured in terms of money. The

principle of indemnity is not applicable

to life insurance.