What are the requisites of insurance for covering risk
Requisites of insurance may be summarized as follows:
1) Insurance must be effected by means of a legal contract and must meet the general requirements of contract as follows:
a) It must be made by parties with legal capacity of contract.
b) It must be effected with a meeting of minds of the patries.
2) For any insurance contract to be valid, it is necessary to have insurable interest of the insured on the subject of insurance. This means that an insured person must suffer a financial loss to himself.
3) Property and liability insurance are subjected to the principle of indemnity which state that a person must not be indemnified more than his actual loss in the event of damage caused by a insured peril. Principle of subrogation ought to be followed where the principle of indemnity is in existence. Under this principle, the insurer is entitled to subrogation which means they acquire the right to recover from the liable of third parties. This is necessary to reinforce the principle of indemnity i.e to prevent the insured to receive more than actual loss.
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