The Six Principles Of Insurance
August 10, 2015 Nicholas 0 Comments
There are actually quite a number of insurance principles. However, the six principle of insurance are the main protection of insurance companies from potential frauds and from people who are attempting to intentionally cheat their way into making claims. As a means of safeguarding their best interest, insurance companies have come up with the six principles of insurance to protect themselves against these cheats.
The six principles of insurance are:
Principle of Utmost Good Faith – it is understood that when you are insuring something that you disclose everything about what you are insuring. Insurance companies do not always have the time to have what you are insuring fully inspected from every nook and cranny. Due to this, they expect you to disclose everything that needs to be disclosed otherwise you may be attempting to commit fraud if you omit important information.
Principle of Insurable Interest – it is understood that what you are insuring is valuable to you and would best be for you if you do not lose it. If in case an item is not that valuable to you and you are insuring it, you would not mind at all if you lose it and thus be able to cash in on claims. If the loss has been deemed as intentional, your insurer will refuse to pay you claims over it.
Principle of Indemnity – it is understood that your insurer will compensate you for loss or damage. However, it will only compensate you for the amount of loss and never more than that. Once payout has been made, your insurer will indemnify you and consider that the insured item is now at its pre-damaged condition.
Principle of Proximate Cause – it is understood that there are different coverage available in each type of insurance. Different perils will be a different insurance coverage. If the damage or loss you have experienced is near the coverage but is not the exact coverage you have, your insurer deny you of any claims.
Principle of Subrogation – it is understood that when a third party causes you damage and your insurer provides you with claim that the insurer will sue the third party in order to get compensation for their loss.
Principle of Contribution – it is understood that you cannot get the same policy from different insurers in order to get more from them should the eventuality do arise. If an eventuality do arise, you will only be given claim to one and both insurers will share and contribute to that amount.