Question

In valued policy of fire insurance, the principle of ............. is violated.

Hint:

Valued policy = pre-agreed value = possible overcompensation, violating indemnity.

Answer 1

The principle of indemnity states that insurance should compensate only for the actual loss suffered, no more and no less.
However, in the case of a valued policy, the value of the insured property is agreed upon in advance between the insurer and the insured.
This agreed amount becomes the claim amount, regardless of the actual loss.
So, if the real loss is less than the agreed amount, the insured gets more than the actual damage, which violates the indemnity principle.
Therefore, in a valued policy of fire insurance, the principle of Indemnity is not strictly followed.