Q.Distinguish between the following:
Life insurance and Fire insurance
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Start your 14-day free trial to unlock the full solution →Life insurance protects human life and pays a fixed assured sum on death or maturity, so it is a contract of certainty (assurance). Fire insurance protects property against fire loss and pays only the actual loss suffered, so it is a strict contract of indemnity.
Basis of distinction between Life Insurance and Fire Insurance
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Meaning / Subject matter — Life insurance is a contract in which the insurer agrees to pay a fixed sum on the death of the insured or on maturity of the policy; the subject matter is human life. Fire insurance is a contract to compensate the insured for loss or damage to property caused by fire; the subject matter is property such as building, stock or machinery.
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Principle of Indemnity — Life insurance is not a contract of indemnity because human life cannot be valued in money; a fixed assured sum is paid. Fire insurance is a contract of indemnity — the insured is compensated only for the actual loss, never more.
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Insurable Interest — In life insurance, insurable interest must exist only at the time of taking the policy. In fire insurance, it must exist both at the time of taking the policy and at the time of loss.
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Element of certainty — Death is certain (only its timing is uncertain), so the claim is bound to arise sooner or later; hence it is called assurance. A fire may or may not occur, so payment is uncertain; hence it is insurance.
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Duration — Life policies are long-term, running for many years. Fire policies are short-term, usually for one year and renewable. …
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