Distinction between Insurance and Wagering Contracts

A wager is a contract whereby two persons or groups with different views on the outcome of an uncertain event agre that some consideration is to pass depending on the outcome. The contract is speculative and contingent. However it differs from insurance in various ways.

  1. Wagers are generally unenforceable whilst insurance contracts are enforceable.
  2. The fundamental distinction between insurance and a wager is the risk in that whereas in insurance risk exists a priori, in a wager there is a deliberate assumption of risk. In the words of Lord Ellenborough in Robertson vs. Hamilton [1811] at p 533
Although insurance and wagering contracts are both speculative contracts, risk is the essence to the insurance contract and the assured and the insured is made to effect the insurance contract because of the risk of loss and does not create the risk of loss by the contract itself”
  1. In wagering contracts neither of the contracting parties has the interest other than the sum to be won or loss depending on the outcome. Payment is dependant upon the event as agreed to by the parties and is not paid by way of indemnity or otherwise. In insurance, the insured has an interest of the subject matter in respect of which he may suffer loss.
  2. The uncertain event upon which the uncertain event depends is prima facie adverse to the insured’s interest and insurance is effected so as to meet the loss or detriment which may be suffered on the happening of the event. In the words of Blackburn J in Wilson Vs. Jones [1867] L.R. 2 EX 139.
  3. In wagers it is essential that either party may win or lose depending on the outcome of the uncertain event. In insurance, the insured pays a premium to furnish consideration, it is not dependant upon the event insured against and the insured cannot be called upon to contribute anything more, whether or not the event occurs.


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