Insurer that the insured is placed in the same financial position ask she or he was before the occurrence of the last event.

  • Insurance is not a profit-making tool 
  • Only for nonlife insurance policies 
  • Life insurance is not a contract of indemnity 

This principle applicable non-life insurance policy’s in case of life insurance policy’s human life value cannot be assertion
Since city’s impossible to calculate the life of the human life value such policies are not censurer as
Indemnity   policy. life insurance policies are not contact of indemnity we should understand that insurance is not a profit-making mechanism we will understand whit the few examples coming slide

PRINICIPLE OF INDEMNITY 

 Let’s spouses Mr. Ali has a house Value of hose -RS 10 Lakh. sum insured -RS 1O Lakh. Loss due to fire RS -70000.  In this case insurance company will pay RS -70000 Mr.Ali
        -70000
Value of house -RS 10 Lakhs but it’s here Mr.Ali to different fire insurance policy from two different insurance. the total Sum insured -RS 20 Lakhs (10 Lakhs policy from tow insurers). And again, due to fire the loss of estimates RS 70000.  But will the insurance company pay RS-70000 each its not so here come a principle of indemnity here total loss is RS -70000 so only the total loss amount will be pay to MR.Ali even those he us taken policy for RS-20 Lakhs.so this is a principle of indemnity

WE WILL SEE ONE MORE EXAMPLE 

 Principle of indemnity -Average clause
See here the value of house -RS10 Lakhs but the insured taken fire insurance policy RS-4 Lakhs .and loss due to fire RS-70000.HO Much claim is payment now, will the insurance company pay 70000
Her we should understand that insurance company normally expect people to take insurance for the full value of the property   here Mr.ALI has taken insurance only for RS -4 Lakhs  but the property value is RS-10 Lakhs this is the case of under insurance in such a case we have a formula wich used to calculate the claim payment payable .the formula is sum insured divide by Actual value of the property    multiply by the claimmemnt of the lossmemmet wich comes those some insurance RS-4 Lakhs the actual value is RS-10 Lakhs  so 4 Lakhs divide by  10 Lakhs and loss amount is  70000 so that value excess 28000 so even those the loss is 70000 the claim payable or admissible only 28000 this condition is average condition so if the sum insurance  less then actual value of the property then only proportional losses payable  not the actual loss by the insurance company so what we call us principle of indemnity