what is insurance : what is difference between insurance and wager.

Insurance

Risk and uncertainty are incidental to life. A man may meet an untimely death. He may suffer from accidents, destruction of property, fire, sea perils, floods, earthquakes, and other natural calamities whenever there is uncertainty. There is the risk as well as insecurity. It is to provide against risk and insecurity that insurance came into being. Insurance does not avert or eliminate loss arising from uncertain events;

 It only spreads the loss over a larger number of people who insure themselves against that risk. The main principle underlying insurance is the pooling of risks. It is thus a cooperative device to spread the loss caused by risk. ( which is covered by insurance ) over many persons who are also exposed to the same risk and insure themselves against that risk.

Difference between insurance and wager 

•   A contract of insurance (except life, accident, and sickness insurance) is a contract of indemnity. It seeks to indemnify the assured for the loss suffered by him on the happening of an uncertain event .in life insurance, the amount payable in case of death of the assured is ascertained and fixed in advance. In a wagering agreement. However. There is no question of indemnity as the parties do not intend to cover any risk.
•    The object of a contract of insurance is to protect the assured against losses on some uncertain events. At the same time, the object of a wagering agreement is to earn speculative gains.

• In a contract of insurance, the assured must have a pecuniary or insurable interest in the subject matter of insurance. In a wagering agreement, neither party has any pecuniary interest except that created by the contract by the contract itself.
• A contract of insurance is a contract requiring utmost good faith by the parties to the contract. In a wagering agreement, good faith need not be observed.
•   A wagering agreement is void ab initio because it is against the public. A contract of insurance is legally enforceable and is encouraged as it benefited the community as a whole.
• A contract of insurance is based on a scientific and actuarial calculation of risks, and the premium is calculated taking into account all the circumstances attending on the risk. A wagering agreement is a more gamble, and there is no scientific calculation of risk.

• An insured event may cause varying degrees of loss or damage. A wager is either won or lost. A contract of insurance, if it is by way of wagering, is void (sec. 6 of the marine insurance act, 1963).

• fundamental elements of insurance

• utmost good faith; The general rule in a contract is that each party is entitled to make the best bargain he can. But there are certain cases where the knowledge of facts is almost exclusively on one side.

• Indemnity;  A insurance contract (except life, personal accident, and sickness insurance) is indemnity. This means that the assured, in case of loss against which the policy has been issued, shall be paid the actual amount of loss not exceeding the amount of the policy.

•   Insurable interest;  insurable interest is necessary to support every contract of insurance. It is the legal right of a person to insure.

•  Causa Proxima; the assured can recover the loss only if it is proximately caused by any of the perils insured against. This is called the rule of causa Proxima.

• Risk must attach; the insurer receives the premium in an insurance contract for running a certain risk.