Note on Re-insurance, Double insurance and Warranty

by • 07/01/2013 • GeneralComments (0)558

Q.2 Write a note on the following:


Double insurance




Sometime, when the insurer accept an insurance for a sum of money which is beyond his capacity to bear, it may pass on a part of the risk (or the whole of it) to mother insurer and thus his own liability arising in case of loss. This is called reinsurance.

“Reinsurance consists of new insurance effected by a new Policy on the same risk which was before insured, in order to indemnify the under writer for his previous subscription and both policies remain in the existence at the some time”.


Reinsurance is thus an agreement between two insurers and the insured is not a party to such a contract. In a contract of re-insurance, the original insurer is called re-insured and the subsequent insurers are the re-insurers. The re-insurers are liable to pay the amount of loss to the original insurer only after the original insurer has paid the amount to the ensured.

Re-insurance can be taken in all types of insurance.


When two or more policies are taken to cover the same risk, it is called double insurance. Anyone can take up any number of policies on his life or property.



If a house worth Rs.50,000/ is insured under two policies of Rs.40.000/= and Rs30,000/= respectively. It is a case of double insurance. But in. the case of loss, the insured can’t recover any amount exceeding the value of loss subject to a maximum of Rs.50,000/=.

Double insurance is profitable only in case of life insurance. A man may take any number of policies on his life yd in case of death; his legal representatives will be entitled to get the amount of all the policies.



A warranty is defined by the Act in following words,


“It is an undertaking by the assured that some particular things shall or shall not be done or that some conditions shall be fulfilled or whereby the affirms the existence of a particular state of facts”.

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