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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Basics of Insurance

Mr. Raman's car, worth Rs 8,00,000, is stolen. His policy has an insured declared value of Rs 8,00,000. He also had a second policy of Rs 8,00,000 with another insurer on the same car. Which principle prevents him from recovering Rs 16,00,000 in total?

The principle of indemnity prevents him from recovering more than the actual loss. Insurance aims to restore the insured to the pre-loss financial position, not to give profit, so total claims across both policies are capped at the Rs 8,00,000 loss.

  1. AUtmost good faith
  2. BIndemnityCorrect
  3. CProximate cause
  4. DInsurable interest

Explanation

Indemnity restricts recovery to the actual loss suffered, so Mr. Raman cannot profit from the loss. Double insurance is handled through contribution between insurers, but the limit on total recovery arises from indemnity. Utmost good faith concerns disclosure.

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