Discuss the various principle of insurance?
Discuss the various principle of insurance?
1. Utmost good faith : It is the duty of the applicant to disclose all the material facts relating to risk to be covered. A material fact refers to the fact which would influence the mind of a prudent underwriter in deciding whether to accept a risk for insurance and on what terms.
2. Indemnity : The purpose of insurance is to restore the insured person to approximately the same financial position that existed prior to the loss. The losses paid here would be approximately the same and the reason for this is to prevent the insured from profiting from insurance to reduce moral hazards. Indemnity can be defined as the compensation of loss or injury sustained.
3. Mitigation : It is the duty of the insured to take reasonable steps to minimize the loss or damage to the insured property. If reasonable care is not taken like any prudent person then the claim from the insurance company may be lost.
4. Subrogation : Subrogation refers to transfer of rights and remedies for the insured to the insurer who has indemnified the insured in respect of the loss.
5. Insurable interest : The person getting an insurance policy must have an insurable interest in the property or life insured. A person is said to have an insurable interest in the property if he is benefited by its existence and prejudiced by its destruction. Without insurable interest, the insurance contract is void.
6. Contribution : The principle of contribution allows the insurer the right to call on other insurers liable for the cost to share the claim payment.
7. Proximate cause : An insurer will only be liable to pay a claim under an insurance contract if the loss which gives rise to the claim was proximately caused by an insured peril. This means that the loss must be directly attributed to an insured peril without any break in the chain of causation.
1. Utmost good faith : It is the duty of the applicant to disclose all the material facts relating to risk to be covered. A material fact refers to the fact which would influence the mind of a prudent underwriter in deciding whether to accept a risk for insurance and on what terms.
2. Indemnity : The purpose of insurance is to restore the insured person to approximately the same financial position that existed prior to the loss. The losses paid here would be approximately the same and the reason for this is to prevent the insured from profiting from insurance to reduce moral hazards. Indemnity can be defined as the compensation of loss or injury sustained.
3. Mitigation : It is the duty of the insured to take reasonable steps to minimize the loss or damage to the insured property. If reasonable care is not taken like any prudent person then the claim from the insurance company may be lost.
4. Subrogation : Subrogation refers to transfer of rights and remedies for the insured to the insurer who has indemnified the insured in respect of the loss.
5. Insurable interest : The person getting an insurance policy must have an insurable interest in the property or life insured. A person is said to have an insurable interest in the property if he is benefited by its existence and prejudiced by its destruction. Without insurable interest, the insurance contract is void.
6. Contribution : The principle of contribution allows the insurer the right to call on other insurers liable for the cost to share the claim payment.
7. Proximate cause : An insurer will only be liable to pay a claim under an insurance contract if the loss which gives rise to the claim was proximately caused by an insured peril. This means that the loss must be directly attributed to an insured peril without any break in the chain of causation.
