(a) Explain the following concepts as used in insurance: (i) subject matter of insurance (ii) subject matter of contract. (b) State when a policy holder is ...

Answer Details

(a)(i) Subject matter of insurance

The subject matter of insurance is the property, life, interest or event that is actually insured, that is the thing exposed to the risk. Examples are a building in fire insurance, a ship in marine insurance, or the life of a person in life assurance. It is the physical or actual thing covered by the policy.

(a)(ii) Subject matter of contract (of insurance)

The subject matter of the contract is not the property itself but the insurable interest the insured has in that property. It is the legal or financial relationship between the insured and the subject matter of insurance, by virtue of which he benefits from its safety and suffers loss from its damage. It is this interest, not the property, that the law recognises as being insured.

(b) When insurable interest must be proved

1. Burglary insurance: Insurable interest must exist both at the time the policy is taken out (inception) and at the time of loss.
2. Marine insurance: Insurable interest need not exist at the time the policy is effected, but it must exist at the time of loss.
3. Life assurance: Insurable interest must exist only at the time the policy is taken out (inception); it need not exist at the time of the claim.