Distinctions between an insurance contract and a wagering contract
A contract of insurance is a contract of indemnity and not a wagering, or gambling contract.(Sec. 25) White it is based on a contingency, it is not a contract of chance and is not used for profit. The distinctions are the following:
Insurance Contract |
Gambling contract |
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Parties seek to distribute loss by reason of mischance |
Parties contemplate gain through mere chance or the occurrence of a contingent event. |
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Insured avoids misfortune. |
Gambler courts fortune |
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Tends to equalize fortune. |
Tends to increase the inequality of fortune. |
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What one insured gains is not at the expense of another insured. The entire group of insureds provides through the premiums paid, the funds which make possible the payment of all claims; |
Essence is whatever one person wins from a wager is lost by the other wagering party. |
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Purchase of insurance does not create a new and non-existing risk of loss to the purchaser. In purchasing insurance, the insurer faces an already existing risk of economic loss. |
As soon as a party makes a wager, he creates a risk of loss to himself where no such risk existed previously. |
Similarities between an insurance contract and a gambling contract?
They are similar in only one respect. In both, one party promises to pay a given sum to the other upon the occurrence of a given future event, the promise being condition upon the payment of, or agreement to pay, a stipulated amount by the other party to the contract.
In either case, one party may receive more, much more, than he paid or agreed to pay.
