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INSURANCE LAW
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Definition A contract between an insurer and the insured in terms of which the insurer undertakes, in exchange for the payment of a sum of money (the premium), to give to the insured a sum of money (or its equivalent) on the occurrence of a specified but uncertain future event in which the insured has some interest
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Insurance legislation
Long Term Insurance Act Short Term Insurance Act
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The 4 essential elements
The insurers obligation to pay a sum of money or its equivalent The insured's obligation to pay the premium The occurrence of an uncertain future event An insurable interest
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Insurable Interest The insured must have some kind of interest in the thing being insured Eg: economic interest This is what distinguishes the insurance contract from a wager or gambling
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Types of insurance Indemnity insurance Non-indemnity insurance
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Indemnity insurance There is uncertainty as to whether the insured event will ever occur Eg: a hijacking, a car accident, a fire The amount of the loss (if any) is unknown at the time of taking out the policy The insured must have an insurable interest in what is being insured
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Non-indemnity insurance
It is certain that the event will occur – the only uncertainty is when Eg: a persons death The amount the insurer must pay is decided at the time the insurance is taken out & is not related to the loss The insured must have an insurable interest in the life of the person being insured
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Good faith The concept of ubermae fides
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Warranties Affirmative warranties Promissory warranties
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Affirmative warranties
A declaration Eg: Age last birthday Materiality
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Promissory warranties
A promise or undertaking Eg: The insured must arm the alarm system whenever leaving the property unattended Does not have to be material
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Under & over insurance Over insured – no benefit to insured
Under insured – insurer will apply average
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Subrogation Places insurer in shoes of insured
Allows insurer to sue in insured’s name Cannot benefit twice from your mishap
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