PRINCIPLES OF INSURANCE

Following are the principles of insurance.
1. Nature of contract:

Nature of contract is a fundamentals of insurance contract. An insurance contract comes into existence once one party makes associate supply or proposal of a contract and also the alternative party accepts the proposal.

A contract should be straightforward to be a valid contract. The person entering into a contract ought to enter together with his free consent.

2. Principal of utmost good faith:

Under this insurance contract each the parties ought to have religion over every alternative. As a client it is the duty of the insured to disclose all the facts to the insurance underwriter. Any fraud or misrepresentation of facts will result into cancellation of the contract.

3. Principle of Insurable interest:
In the principle of insurance, the insured must have interest in the subject material of the insurance. Absence of insurance makes the contract null and void. If there is no stake, an insurance company won't issue a policy.

An insured interest should exist at the time of the acquisition of the insurance. For example, a creditor has associate insured interest within the lifetime of a human.

4. Principle of indemnity:

Indemnity means security or compensation against loss or injury. The principle of indemnity is such principle of insurance stating that associate insured might not be stipendiary by the insurance underwriter in an quantity exceptional the insured’s economic loss.

In type of insurance the insured would be compensation with the quantity admire the particular loss and not the quantity exceptional the loss.

This is a regulatory principal. This principle is observed a lot of strictly in property insurance than in life insurance.

The purpose of this principle is to line back the insured to a similar financial position that existed before the loss or injury occurred.

5. Principal of subrogation:

The principle of subrogation permits the insured to claim the quantity from the third party answerable for the loss. It allows the insurance firm to pursue legal strategies to recover the quantity of loss, For example, if you get injured in a road accident, due to reckless driving of a 3rd party, the insurance company will compensate your loss .Insurance can additionally sue the third party to recover the money paid as claim which is paid to the insured by third party

6. Double insurance:

Double insurance denotes insurance of same subject matter with 2 completely different|completely different} corporations or with a similar company below two different policies. Insurance is possible just in case of indemnity contract like fireplace, marine and property insurance.

Double insurance policy is adopted where the money position of the insurance firm is uncertain. The insured cannot recover more than the particular loss and can't claim the complete quantity from each the insurers.

7. Principle of proximate cause:

Proximate cause literally refer to the nearest or closest cause. This principle is applicable when the loss is the results of 2 or a lot of causes. The proximate cause means; the most dominant and simplest reason behind loss is taken into account. This principle is only  applicable  in the case when there are series of causes of injury or loss.