Compensation, Insurance

the amount paid by an insurance company to the insured when covered damages occur. In the USSR, insurance compensation is paid by the Central Administration of State Insurance, or Gosstrakh. The amount paid depends on whether or not the property was insured for its full value and on the extent of the damage. Under obligatory insurance, damages are reimbursed in the full amount of the coverage in cases of total loss of property and in the specific sum provided for by the policy in cases of partial damage. Under a voluntary insurance contract, insurance compensation is paid in an amount equal to the losses incurred but within the limits of the coverage (for example, the Civil Code of the RSFSR, art. 388).

Two systems of computations are used to determine the amount of a loss in cases of partial damage to property not insured for its full value. With the proportional liability system, which is more common, the ratio of insurance compensation to the value of the damages is equal to the ratio of the coverage to the insured interest, that is, the actual value of the insured property. Under the system based on the first loss principle, which is used to insure chattels and transportation, insurance compensation is paid in the amount of the full value of the incurred damages but within the policy’s coverage.