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Answer
Under
Section 124 of the Indian Contract Act, 1872, a contract of indemnity refers to
a promise made by one party to indemnify the other for losses caused by the
conduct of the promisor or a third person. The scope is limited to specified
causes of loss, namely human actions, with the aim of restoring the indemnified
party to their original financial position by covering measurable losses.
In
contrast, insurance contracts often cover risks beyond human actions, such as
natural disasters (acts of God) and life insurance, which cannot be strictly
categorized under indemnity.
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Understanding Differences: Contract of Indemnity vs. General Insurance
and Life Insurance
1. General
Insurance Contracts (e.g., fire, marine, or health insurance) cover uncertain
or accidental risks, including losses beyond human control, acts of God, which
is not the subject matter of indemnity contracts. These contracts compensate
for actual losses arising from uncertain events and are classified as
contingent contracts, as they depend on events that may or may not happen.
2. Life
Insurance Contracts differ as they involve a fixed payout upon the insured’s
death or after a specified period (maturity), regardless of any actual
financial loss. Since life insurance is not aimed at indemnifying loss but
providing financial security, based on a certain event, covers losses beyond
human actions; hence it cannot be classified as either a contingent contract or
a contract of indemnity.
Therefore,
it can be concluded that insurance contracts are not part of the 'contract of
indemnity.' While general insurance can be classified under the category of
contingent contracts due to its dependence on uncertain events that go beyond
human control, life insurance even stands apart from both of these concepts.
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