$1\mathrm{.}5$ NON$-$INDEMNITY OR LIFE INSURANCE $(5)$

In the case of non$-$indemnity or capital insurance $($previously classified as long$-$term

insurance$)$ on the other hand, the loss suffered and the amount paid by the insurer are not

necessarily proportionate. The nature of the interest insured is non$-$patrimonial, for

example,the unlimited interest a person has in his$/$her own life, health of body and mind, or

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the emotional interest in the life of a spouse or child. Long$-$tem insurance business means the

business of providing or undertaking to provide policy benefits under long$-$term policies,

which are defined as $"$an assistance policy, a disability policy, fund policy, health policy, life

policy or sinking fund policy, or a contract comprising a combination of any of those policies;

and includes a contract whereby any such contract is varied".These long$-$term contracts

provide policy benefits and are issued for defined longer time periods, usually exceeding one

year. For example. A takes out life insurance on his life for R$400000,$ and B takes out life

insurance for R$800000.$ Should they die, the insurer has to pay A$\text{'}$s estate R$400000$ and B$\text{'}$s

estate R$800000.$ This does not mean that B$\text{'}$s life is worth double the value of A$\text{'}$s life. When

the risk occurs, the insurer is liable to pay only a specific contractually agreed amount to the

insured.

Three practical differences between indemnity and non$-$indemnity insurance can be

identified:

$($a$)$ In the case of indemnity insurance, the insurable interest $($that which is insured$)$ has to

exist at the time of loss or damage, but in the case of non$-$indemnity insurance, it must already

exist at the time of conclusion of the insurance contract $($life insurance policies that insure the

lives of unborn children or children under the ages of $14$ years may be issued in limited

circumstances subject to certain restrictions.

$($b$)$ The rules of proportionate contribution and subrogation apply to indemnity insurance, but

not to non$-$indemnity insurance.

$($c$)$ The insurer's liability in the case of indemnity insurance is limited to the amount of

damages actually incurred, while this is not the case with non$-$indemnity insurance. Where a

policy is a so$-$called "valued policy", the parties agree on the value of the interest and the

question arises as to whether this is still in fact indemnity insurance if an over$-$valuation leads

to over$-$compensation. Difficulties also exist in identifying the nature of "new for old"

insurance, where an old interest is replaced by a new one of similar description, as indemnity

insurance. These policies are quite common in our current insurance market. Public policy not

only dictates that parties may freely conclude contracts and that such contracts must be

enforced in law, but in these cases also expects that the agreed loss must be in proportion to

the actual patrimonial loss suffered if the risk realises. It is also expected that there should be

some form of certainty as to the content of the agreement between the parties, in order to

comply with the requirements of physical possibility and certainty, legality and formalities set

for the conclusion of valid contracts.

Choose the most correct answer,from A$-$E below. $(5)$

A$.$ Only those who have an insurable interest can recover on the policy and then only in excess

to the extent to which that insurable interest is damaged or lost.

B$.$ Usually the decision rests with the bank who applies the reasonable person$$s test in

assessing materiality of facts relating to disclosure.

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C$.$The risk $($hazard$)$ insured$-$The occurrence of a certain future event, e$.$g$.$ car accident,

or death.

D$.$The insurer's liability in the case of indemnity insurance is limited to the amount of damages

actually incurred, while this is not the case with non$-$indemnity insurance.

E$.$ In the case of non$-$indemnity or capital insurance $($previously classified as long$-$term

insurance$)$ on the other hand, the loss suffered and the amount paid by the insurer are always

exactly proportionate

Use the Harvard referencing method.