Insurance Services — Important Questions

The policy remains valid because insurable interest in life insurance must exist only at the time of taking the policy

Step 1: The Principle of Insurable Interest states that the policyholder must have a financial interest in the life or property insured. Step 2: For Life Insurance specifically, insurable interest must exist ONLY at the time of entering into the contract (at the time of taking the policy). Step 3: In this case, Raj had insurable interest in Meena's life when they were married and the policy was taken. Step 4: Even after the divorce, the life insurance policy remains valid because the condition (insurable interest at time of taking policy) was already fulfilled. Step 5: Compare with fire insura

Principle of Causa Proxima – the nearest cause of loss was delay in unloading, not an accident

Step 1: The Principle of Causa Proxima (Nearest Cause) states that the insured can only claim compensation if the loss is caused by the specific risk insured against. Step 2: The ship was insured specifically against 'accidents during voyage.' Step 3: The ship arrived safely – no accident occurred. The oranges spoiled because of delay in unloading, not due to any accident. Step 4: Since the proximate (nearest/direct) cause of loss was 'delay in unloading' and NOT an accident, the insurer is not liable. Step 5: This is the exact example given in the textbook. Option A, C, and D are wrong as tho

₹3,50,000 – the policy value reduces by the declared value of each shipment

Step 1: A Floating Policy is a type of marine insurance where a round sum (total amount) is fixed for multiple shipments over a period of time. Step 2: Each time cargo is shipped, the value is declared to the insurance company. Step 3: The declared value of that shipment is deducted from the total policy value. Step 4: In this case: ₹5,00,000 – ₹1,50,000 = ₹3,50,000 remaining. Step 5: Shipments continue until the total policy value is exhausted. This makes floating policy very convenient for exporters and importers who ship goods frequently.

In an Endowment Policy, the sum assured is paid at the end of a fixed period or on earlier death; in a Whole Life Policy, the sum is paid only on death

Step 1: Understand Whole Life Policy – premium is payable throughout the life of the insured, and the sum assured is paid ONLY after the death of the insured to the legal heirs. Step 2: Understand Endowment Policy – it runs for a limited, specified period (e.g., 20 years). Step 3: In an Endowment Policy, the sum assured is paid at the end of the policy term OR on the death of the insured, whichever is earlier. Step 4: Option A is wrong because Endowment Policy can also pay during the insured's lifetime. Step 5: Options C and D incorrectly swap the features of both policies.