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Discuss the essentials of an insurance contract?

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1. Agreement
For a contract of insurance to exist, there must be an agreement under which the insurer is legally
bound to compensate the other party or pay the sum assured [premium]. This is the consideration
that passes between the parties to support the transaction. It is asserted that premium is the
considerations which the insurers receive from the insured in exchange for their undertaking to
pay the sum assured in the occurrence of the event insured against. Any consideration sufficient
to support a simple contract may constitute a premium in a contract of insurance.
2. Uncertainty
The insurance contract is aleatory, contingent or speculative as it deals with uncertain future
events. For an event to be Insurable it must be characterized by some uncertainty.
3. Insurable Interest
The insurable event must be of an adverse nature .i.e. the insured must have an Insurable interest
in the property, life or liability which is the subject of the insurance. Insurable interest is said to
be the pecuniary or financial interest which is at stake or in danger if the subject matter is not
insured. It is a basic requirement for the contract of insurance.
4.Control
The insurable event must be beyond the control of the party assuring the risk as it was held in
Re Sentinel Securities P.L.L
5. Accidental or Negligent Loss
Insurance can only be effected where loss is accidental in nature or is a consequence of a
negligent act or omission. Loss occasioned by intentional acts does not qualify for indemnity or
for payment of the sum assured. It was so held in Toxleth v Hampton.
6. Risk
Risk has been defined as the chance of loss, the probability of loss or the probability of any
outcome different from the one expected. It is a condition in which there is a possibility of an
adverse deviation from a desired outcome that is expected or hoped for. For individual proposes,
risk is measured by the probability of loss as the individual hopes that it would not occur.

sharon kalunda answered the question on April 12, 2019 at 13:05

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Discuss the essentials of an insurance contract?

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