7 Principles Of Insurance

Question 1

Indemnity

Answer 1

compensating a person for damages or losses they have incurred or will incur related to a specified accident, incident, or event.

Question 2

Subrogation

Answer 2

This principle comes into play when a loss has occurred due to some other person/party and not the insured. In such a case, the insurance company has a legal right to reach that party for recovery.

Question 3

Utmost good faith

Answer 3

This is a primary principle of insurance. According to this principle, you have to disclose all the information that is related to the risk, to the insurance company truthfully.

You must not hide any facts that can have an effect on the policy from the insurer. If some fact is disclosed later on, then your policy can be cancelled. On the other hand, the insurer must also disclose all the features of a life insurance policy.

Question 4

Contribution

Answer 4

if you have taken insurance from more than one insurer, both insurers will share the loss in the proportion of their respective coverage.

If one insurance company has paid in full, it has the right to approach other insurance companies to receive a proportionate amount.

Question 5

Loss minimisation

Answer 5

You must take all the necessary steps to limit the loss when it happens. You must take all the necessary precautions to prevent the loss even after purchasing the insurance.

Question 6

Proximate cause

Answer 6

Nearest cause leading to a loss

a truck driver swerves and hits a car, the driver is the actual cause of the accident. But if they moved to avoid a bicyclist riding on the road, the bicyclist’s unsafe driving might be the proximate cause

Question 7

Insurable interest

Answer 7

The interest that a person has in something such as a particular property or another individual, which means that the person would suffer a loss should that property or individual be harmed