7 Most Important Principles of Insurance PDF

4/6/2016
7MostImportantPrinciplesofInsurance
7 Most Important
Principles of Insurance
bySmritiChandInsurance
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The important principle of insurance are as follows:

The main motive of insurance is cooperation. Insurance
is defined as the equitable transfer of risk of loss from
one entity to another, in exchange for a premium.
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ImageCourtesy:framab.com/wpcontent/uploads/2013/06/ShortTermLifeInsurance.jpg
1.Natureofcontract:
Nature of contract is a fundamental principle of
insurance contract. An insurance contract comes into
existence when one party makes an offer or proposal of
a contract and the other party accepts the proposal.
A contract should be simple to be a valid contract. The
person entering into a contract should enter with his
free consent.
2.Principalofutmostgoodfaith:
Under this insurance contract both the parties should
have faith over each other. As a client it is the duty of
the insured to disclose all the facts to the insurance
company. Any fraud or misrepresentation of facts can
result into cancellation of the contract.
3.PrincipleofInsurableinterest:
Under this principle of insurance, the insured must have
interest in the subject matter of the insurance. Absence
of insurance makes the contract null and void. If there is
no insurable interest, an insurance company will not
issue a policy.
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An insurable interest must exist at the time of the

purchase of the insurance. For example, a creditor has
an insurable interest in the life of a debtor, A person is
considered to have an unlimited interest in the life of
their spouse etc.
4.Principleofindemnity:
Indemnity means security or compensation against loss
or damage. The principle of indemnity is such principle
of insurance stating that an insured may not be
compensated by the insurance company in an amount
exceeding the insureds economic loss.
In type of insurance the insured would be compensation
with the amount equivalent to the actual loss and not
the amount exceeding the loss.
This is a regulatory principal. This principle is observed
more strictly in property insurance than in life
insurance.
The purpose of this principle is to set back the insured to
the same financial position that existed before the loss
or damage occurred.
5.Principalofsubrogation:
The principle of subrogation enables the insured to
claim the amount from the third party responsible for
the loss. It allows the insurer to pursue legal methods to
recover the amount of loss, For example, if you get
injured in a road accident, due to reckless driving of a
third party, the insurance company will compensate
your loss and will also sue the third party to recover the
money paid as claim.
6.Doubleinsurance:
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Double insurance denotes insurance of same subject

matter with two different companies or with the same
company under two different policies. Insurance is
possible in case of indemnity contract like fire, marine
and property insurance.
Double insurance policy is adopted where the financial
position of the insurer is doubtful. The insured cannot
recover more than the actual loss and cannot claim the
whole amount from both the insurers.
7.Principleofproximatecause:
Proximate cause literally means the nearest cause or
direct cause. This principle is applicable when the loss
is the result of two or more causes. The proximate cause
means; the most dominant and most effective cause of
loss is considered. This principle is applicable when
there are series of causes of damage or loss.
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7 Most Important Principles of Insurance PDF

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Formatos disponíveis

4/6/2016

Sany Excavating Machine

The important principle of insurance are as follows:

An insurable interest must exist at the time of the

Double insurance denotes insurance of same subject

Role of Colour in House Decoration

Aluminium (Bauxite) : Natural Compounds and its

Before publishing your

Dr. Taylors Contributions

Study Notes on Scientific

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