Insurance Awareness - Life Insurance - LIC
Which of the following best explains why the principle of indemnity does NOT apply to life insurance?
Which of the following best explains why the principle of indemnity does NOT apply to life insurance?
hard Q9 of 15
Step-by-Step Solution
Step 1: Understand the principle of indemnity
Indemnity means compensation for actual financial loss, which is measurable.Step 2: Apply to life insurance
Loss of human life is immeasurable in monetary terms, so life insurance pays a predetermined sum assured rather than indemnifying actual loss.Step 3: Analyze other options
Because life insurance policies cover only accidental losses is incorrect as life insurance covers death risk, not only accidents; Because life insurance policies are short-term contracts is wrong as life insurance is long-term; Because the insurer pays only the actual expenses incurred applies to general insurance.Final Answer:
Because the loss of human life cannot be measured in monetary terms → Option BQuick Check:
Indemnity principle is not applicable because human life loss is not quantifiable.
Quick Trick: Indemnity does not apply because life loss is unquantifiable.
Common Mistakes:
MISTAKES- Assuming indemnity applies to life insurance claims.
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