The idea of risk and uncertainty exists in every aspect of human life. Human beings face threats from deaths, illness, old age and so on. Their properties are also exposed to certain risks like fire, theft and so on. It is in these situations that insurance comes into existence to guard against risk and uncertainty.
INSURANCE AND WAGERING
A wagering agreement is one in which a person promises to pay money or to transfer property to another person upon the happening or non-happening of some uncertain event. Insurance has some resemblance with a wagering agreement because it is also based on uncertain events to say events which may or may not occur.
DISTICNTIONS BETWEEN INSURANCE AND WAGERING AGREEMENTS
All contracts of insurance except life and personal accident insurances are contracts of indemnity that is replacement of actual loss. In a wagering agreement there’s no question of indemnity because the parties do not intend to cover any risk.
Purpose or objectives
The purpose of a contract of insurance is to protect the insured against losses on the happening of some uncertain events whereas the purpose of wagering agreement is to earn some speculative gains.
In a contract of insurance, the insured must have insurable interest in the subject matter of insurance. Otherwise the whole contract is void. In a wagering agreement, neither party has an insurable interest except that created by the agreement itself.
Utmost Good faith
A contract of insurance is one which requires good faith to be observed by the parties that is the insurer and the insured. No utmost good faith, No contract of insurance. In a wagering agreement, good faith need not to be observed by the parties.
A wagering agreement is void and in-operative from the beginning because it is illegal and against public policy (that is public interest) A contract of insurance is legally binding and it is encouraged as it benefits the society at large.
Calculation of risk
A contract of insurance is based on scientific calculation of risk and the premium payable is calculated by taking into account all the circumstances attaining to the risk. A wagering agreement is a mere gamble and there is no scientific calculation of risk.
Degree of Loss: In a contract of insurance the Risk insured against may cause varying degree of loss. On the other hand, a wager is fixed at the time of the agreement and it is either won or lost the way it is.
NOTE: COVER NOTE; this is a document issued by an insurer or an underwriter pending the execution of the policy. It covers the risk between the date of the contract of insurance and the actual date of the issue of the policy of insurance.
THE MANAGEMENT SYLLABUS
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Winston_Tony Eboyi is a Project Manager who runs programs on Personal Development and matters Business Branding. www.twicgroup.com