Under the Ethiopian commercial code, there are three types of insurances. They are insurance against damages, insurance of liability for damages and insurance of persons. Let’s see each type of insurance at a time.
1. Insurance Against Damages
Some of the most serious financial risks that a person faces are those arising from possible loss of home from fire, injury and damages results from automobile accident and legal suit for wrong doing. The uncertainty of loss in such cases may be lessened by insurance.
Insurance against damages or property protects the insured against loss caused by direct physical damage to real and personal property. This category of insurance covers losses caused by accident or negligence that damages property; such as damage to one’s automobile resulting from collision. Others involve injuries to third persons and arise from extra-contractual liability of insured person. The purpose of all property insurance against damages is indemnification for loss. This means that a person who experiences a loss recovers what he or she lost. What the insured gets as compensation /indemnity/ is not more than the actual value of the property at the time it was destroyed. If the loss is not total, the insured is compensated only to the extent of the loss. This is true even if the insured has policies with more than one company. Article 678 of the commercial code states that; “A contract for insurance of an object is a contract for compensation”. Therefore compensation shall not exceed the value of the object insured on the day of the occurrence.”
Insurance companies provide such indemnification of loss for almost any kind of property and against almost all risks. Sometimes, exclusions may be stated in the policy (contract of insurance). Exceptions like Losses due to war, invasions, insurrections, nuclear disaster and depreciation are common. In such cases the burden of proof is on the insurer.
2. Insurance of persons
When persons are insured, the insurance policy shall extend to risks arising out of death or life or risks arising out of injury to the person or illness. Where the term” insurance of persons” is used in the policy, it includes the risk of death, the risk of bodily injury or injury (Article 654 of commercial code.)
Contract for the insurance of persons shall not be considered as contract for compensation. That means what the insurer pays to the insured or to the beneficiary is not compensation. As a rule, compensation is always equal to loss, but you cannot express human value in terns of money. You cannot put monetary value to a human life .As a result the amount insured is freely fixed. As long as the insured afford it he can buy a policy for millions.
In property insurance, what one collects as a compensation is the value of the property on the day of contract and on the day of loss is not the same. Property usually depreciates. But human value does not depreciate. Therefore, the amount insured in insurances of persons is freely fixed and shall be paid regardless of the damages suffered by the insured persons. Life insurance may be insurance for the event of life or insurance for the event of death. Where the policy is for the event of life, the insurer agrees to pay a specified capital or life interest provided the insured person is alive at a date fixed in the policy.
The benefit is paid to the insured person himself because he is alive. Insurance for the event of life is also called endowment life insurance. Endowment life insurance is in force for a limited life. It provides for payment to the insured if living at the end of a specified time.
On the other hand, the insure who enters into an insurance for the event of death agrees to pay , on the death of the insured person, a specified capital or life interest to those having rights from the insured person or to the beneficiary named in the policy. If the policy is for the event of death the insurance benefit is paid to a specified beneficiary or to those having rights from the insured.
A person who buys the policy can name any person as beneficiary. There need not to be a blood relationship between the subscriber and the beneficiary. However, the spouse of the insured and the children of the insured are always considered to be the beneficiaries even if their names do not appear in the policy, Article 705 of the commercial code states “where no beneficiary has been specified or he has revoked or is not alive, the capital to be paid by the insurer shall be paid to the estate of the subscriber”
Where no one has been specified as a beneficiary, the benefit is traded like any other property of the insured person. In such a case, all persons who have rights from the subscriber may get their share; it is safe to say the law of succession applies.
An insurance policy for the event of death may be made by a third party. However the insured person must agree to the insurance in writing. If the insured person is married, his wife or her husband must agree.
There is an interesting question in connection with life insurance policy, i.e. what if the beneficiary commits suicide? According to Art 699 of commercial code, “Notwithstanding any provision to the contrary an insurance policy for the event of death shall be of no effect where the insured person knowingly commits suicide. The insurer shall establish that suicide was committed knowingly.” The other issue is that if the beneficiary kills the insurer intentionally and if he is convicted (meaning found guilt), the beneficiary losses his benefit.
3. Insurance of liability for damages
Art 685 of the commercial code states “the insurer who insured a liability for damages shall not pay compensation until a claim is made against the insured person with a view to amicable or judicial settlement” Here if one person is insured against liability for damages, their party who claims to be injured by this person must appear to pay the insurance. Some employers may insure their employees against liability for damages they caused.
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Further, any pertinent information about investment in Ethiopia, tax in Ethiopia, can be available from an Ethiopian Lawyer, Ethiopian Insurance Lawyer, Ethiopian Bank Lawyer, Ethiopian Tax lawyer and Ethiopian Investment Lawyer.