5 Basic principles of insurance

Welcome to 5 Basic principles of insurance

Insurance is a contract, a mechanism of transfer of risk whereby a company (a subscriber) promised to compensate or indemnify another party (lessee) on the payment of a reasonable premium to the insurance company to cover the topic of insurance. If you are well aware of these principles, you will be in a better position in the negotiation you insurance needs.

1. Insurable interest. It financial or monetary interest as the owner or possessor of the property in the object of the insurance. The mere fact that it might be prejudicial to him should a loss occurred because of its financial participation in this asset gives it the ability to insure the property. Castellin Vs Preston 1886.

2 Umberima fadei. This means maximum in good faith, this principle stated that the parties to the contract of insurance must communicate accurately and fully all the material facts of the proposed risk. That is to say that the insured must make known to the insurer all the facts concerning the risk to be insured (Looker Vs Law Union and Rock 1928). Similarly, the Subscriber must highlight and explain the terms, conditions and exceptions of the insurance policy. And the policy must be empty of "small print".

3 Compensation. He stated that, following a loss, the insurer should ensure that they placed the insured in the exact financial position he enjoyed prior loss (Leppard vs. excess 1930).

4 Contribution. In a situation where two or more insurers is covering a particular risk if a sinister, insurers must contribute to the settlement of the claim according to their proportional share.

5 Subrogation. It was often said that contribution and subrogation are corollary of compensation, which means that these two principles operates so that the compensation does not lack. Subrogation operates primarily on automobile insurance. When an accident involving two or more vehicles, there must be some diligence (s) which is responsible for the accident. On this basis, the insurer covering the payee was not at fault may recover their expenditure of the insurer to the policyholder which is responsible for the impact.

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