General Insurance is a contract of insurance, by which insurer agree's to INDEMNIFY the insured in exchange of a sum we call premium, on happening of event against which insurance is done.
It is a contract of Indemnity. All essential of a normal contract are to be observed here. It is invoked to re instate status quo. So for an exchange of premium the insurer will indemnify the insured against loss or injury that is caused due to happening of the event against which the insurance is taken.
What is contract of indemnity?
Indemnity means “when a person promises to the save the other from loss caused from the conduct of promisor himself or by the conduct of any other person”. Though the definition is itself not complete in the Indian Contract Act. The courts have held that the definition in English law is to be followed. This was held in the case of GAJANAN MORESHWAR V. MORESHWAR MADAN.
Indemnity is a type of contingent contract. It also depends on happening of events. The contract of insurance is also a contract that is contingent to the happening of an event. Insurance is a contingent contract but is not a wager. There is a huge difference between the contract of wager and a contingent contract. The major event of wager is not causing any loss to the promisee. A contingent contract on the other hand is contingent on the happening of any event that may result in loss of the promise.
The contract of insurance is indeed a contact of indemnity. As the following is noticed in both the contracts:
1) Both are contingent on happening of an event.
2) Both are special contracts, but the general principal applies to both.
3) A promise to compensate is common.
4) Consideration must be there.
