LEARN MORE...

Home
Documents
March 2021
9
Insurance principles

Insurance principles

Content type

User Generated

Uploaded By

GurEblnyCebsrffbe

Pages

Showing Page:

1/5

Principles of Insurance.

The Principle of Utmost Good Faith

• Both parties involved in an insurance contract—the insured (policy

holder) and the insurer (the company)—should act in good faith

towards each other.

• The insurer and the insured must provide clear and concise

information regarding the terms and conditions of the contract

This is a very basic and primary principle of insurance contracts because

the nature of the service is for the insurance company to provide a

certain level of security and solidarity to the insured person’s life.

However, the insurance company must also watch out for anyone

looking for a way to scam them into free money. So each party is

expected to act in good faith towards each other.

If the insurance company provides you with falsified or misrepresented

information, then they are liable in situations where this

misrepresentation or falsification has caused you loss. If you have

misrepresented information regarding subject matter or your own

personal history, then the insurance company’s liability becomes void

(revoked).

The Principle of Insurable Interest

Insurable interest just means that the subject matter of the contract must

provide some financial gain by existing for the insured (or policyholder)

and would lead to a financial loss if damaged, destroyed, stolen, or lost.

• The insured must have an insurable interest in the subject matter of

the insurance contract.

• The owner of the subject is said to have an insurable interest until

s/he is no longer the owner.

In auto insurance, this will most times be a no brainer, but it does lead to

issues when the person driving a vehicle doesn’t own it. For instance, if

you are hit by a person who isn’t on the insurance policy of the vehicle,

do you file a claim with the owner’s insurance company or the driver’s

Showing Page:

2/5

insurance company? This is a simple but crucial element for an insurance

contract to exist.

The Principle of Indemnity

• Indemnity is a guarantee to restore the insured to the position he or

she was in before the uncertain incident that caused a loss for the

insured. The insurer (provider) compensates the insured

(policyholder).

• The insurance company promises to compensate the policyholder

for the amount of the loss up to the amount agreed upon in the

contract.

Essentially, this is the part of the contract that matters the most for the

insurance policyholder because this is the part of the contract that says

she or he has the right to be compensated or, in other words,

indemnified for his or her loss.

The amount of compensation is in direct proportion with the incurred

loss. The insurance company will pay up to the amount of the incurred

loss or the insured amount agreed on in the contract, whichever is less.

For instance, if your car is inured for $10,000 but damages are only

$3,000. You get $3,000 not the full amount.

Compensation is not paid when the incident that caused the loss doesn’t

happen during the time allotted in the contract or from the specific

agreed upon causes of loss (as you will see in The Principle of Proximate

Cause). Insurance contracts are created solely as a means to provide

protection from unexpected events, not as a means to make a profit

from a loss. Therefore, the insured is protected from losses by the

principle of indemnity, but through stipulations that keep him or her

from being able to scam and make a profit.

The Principle of Contribution

• Contribution establishes a corollary among all the insurance

contracts involved in an incident or with the same subject.

Showing Page:

3/5

End of Preview - Want to read all 5 pages?

Access Now

Unformatted Attachment Preview

Principles of Insurance. The Principle of Utmost Good Faith • • Both parties involved in an insurance contract—the insured (policy holder) and the insurer (the company)—should act in good faith towards each other. The insurer and the insured must provide clear and concise information regarding the terms and conditions of the contract This is a very basic and primary principle of insurance contracts because the nature of the service is for the insurance company to provide a certain level of security and solidarity to the insured person’s life. However, the insurance company must also watch out for anyone looking for a way to scam them into free money. So each party is expected to act in good faith towards each other. If the insurance company provides you with falsified or misrepresented information, then they are liable in situations where this misrepresentation or falsification has caused you loss. If you have misrepresented information regarding subject matter or your own personal history, then the insurance company’s liability becomes void (revoked). The Principle of Insurable Interest Insurable interest just means that the subject matter of the contract must provide some financial gain by existing for the insured (or policyholder) and would lead to a financial loss if damaged, destroyed, stolen, or lost. • • The insured must have an insurable interest in the subject matter of the insurance contract. The owner of the subject is said to have an insurabl ...
Purchase document to see full attachment