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5 Fundamental Principles of Insurance

Insurance is a contract, a risk transfer mechanism, in which the company (the insurer) promises to compensate or indemnify the other party (the policy holder) to cover the subject of insurance after paying a reasonable premium to the insurance company. If you are very familiar with these principles, you will be able to better negotiate insurance needs.

.1- Insurable benefits. This is the financial or monetary interest of the owner or owner of the property in the subject matter of insurance. If a loss occurs due to his financial interest in the asset, it may be to his disadvantage, and this fact enables him to insure the asset. Castrin vs. Preston in 1886.

2- Acorus. This means utmost good faith. The principle stipulates that the parties to an insurance contract must accurately and fully disclose all important facts related to the proposed risk. In other words, the insured must let the insurer know all the facts about the insured risk (Looker Vs Law Union and Rock 1928). Likewise, the insurer must emphasize and explain the terms, conditions and exceptions of the insurance policy. And the policy must have no “small print”.

3- Compensation. It states that after a loss occurs, the insurer should ensure that they place the insured in the exact financial situation he enjoyed before the loss (Leppard Vs Excess 1930).

4- Contribute. In the case of two or more insurance companies underwriting certain risks, if a loss occurs, the insurance company must contribute to the settlement of claimsbyh its taxable proportion.

5- Subrogation. It is often said that contribution and subrogation are the inevitable results of compensation, which means that the operation of these two principles makes compensation not fail. Subrogation claims are mainly for car insurance. In the event of an accident involving two or more vehicles, the infringer must be responsible for the accident. On this basis, the insurer who underwrites the no-faultpolicyholder can recover its expenses from the insurer of the policyholder responsible for the accident

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