Question

What is the significance of the principle of contribution?

a.

It ensures that the insured also contributes a certain portion of the claim along with the insurer

b.

It ensures that all the insured who are a part of the pool, contribute to the claim made by a participant of the pool, in the proportion of the premium paid by them

c.

It ensures that multiple insurers covering the same subject matter; come together and contribute the claim amount in proportion to their exposure to the subject matter

d.

It ensures that the premium is contributed by the insured in equal instalments over the year.

Posted under IC38 Life Insurance Agent Exam

Answer: (c).It ensures that multiple insurers covering the same subject matter; come together and contribute the claim amount in proportion to their exposure to the subject matter Explanation:The principle of contribution is important in general insurance contracts where there might be multiple insurance policies covering the same subject matter. This principle ensures a fair distribution of liability among the insurers based on the extent of their coverage, preventing the insured from receiving more than the actual loss suffered.

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