1. When entering into a legally enforceable insurance contract consideration must exist. Explain what consideration is...
1. When entering into a legally enforceable insurance contract consideration must exist. Explain what consideration is and the form it takes in insurance contracts.
2. Explain the principle of subrogation. Provide a mathematical example of its use.
Homework Answers
1. Consideration means the value which the parties in the contract agrees to pay to each other.In insurance contracts there are two parties Insurer and Insured where where insured pays consideration in the form of premium whereas insurer agress to pay for covered losses that the insured suffers.
2. Principle of subrogation means where the insurer pays the full compensation for any loss incurred by the insured against insured property,the insurer gets the legal right of the insured property since insurer has paid the full compensation for the insured property.
Mathematical example :-
Suppose a person injured in an accident and insurer pays $10000 pays to medical bills and at the same time insurance company is allowed to collect $10000 from at-fault party to recover the payment.
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