Principles Of Insurance Flashcards
What are the seven principles of insurance?
Insurable interest Indemnity Subrogation Contribution Utmost good faith Proximate cause Loss minimisation
Insurable interest
Insurance interest is the legally recognised relationship between insured on the subject matter of the insurance
For insurable interest what must exist?
The relationship between the insured and the subject matter of the insurance must be legal
The insured must stand to lose
Legally recognise relationships of Insurable interest?
Owners and joint owners
Executors
Trustees
Indemnity
Indemnity is the financial compensation sufficient to place the insured in the same financial position after the loss as they enjoyed immediately before it
What is the purpose of an insurance contract for indemnity?
Not for making a profit but to give compensation in any event of any damage or loss
Utmost-good faith 
A positive duty voluntary to disclose accurately and fully all facts material to the risk whether requested or not
What facts do not need to be disclosed?
Utmost-good faith
Facts of law Spent convictions Facts of public knowledge Facts which lessen risk Facts where the insured has wavered the right to information
Subrogation
The right of one person having indemnified another under a legal requirement to do so to stand in the place of the other and avail themselves of all the rights and remedies of the other
How can Subrogation arise?
Tort, contract statute and subject matter
Tort
Wrongful act or the impairment of a right to cause by the negligence of a person or any other act or omission that is not criminal in nature
Statute
Declarative policy or law that has been passed by legislative authority
Contract
Illegal agreement that spells out the responsibilities of both insurance company and the insured
Subject matter
Insurers pay out and put you back in the position you started. Insurers will keep the salvage as the subject matter.
Contribution
The right of an insurer to call upon others similarly but not necessarily equally liable to the same insured to share the cost of the indemnity payment
If the insured has more than one policy on the same subject matter the insurer paying the claim can recover a proportion of their cost from the other insurer
What must happen for contribution to take place?
2 or more policies in place
The policies must cover a common peril
Policies must cover the same subject matter
Proximate cause
Is the active efficient courses set in motion are training events which brings about a result without intervention of any force started and working actively from a new an independent source
When are Las is caused by more than one cause the nearest and closest cause should be taken into consideration to decide the liability of the insurer
Loss minimisation
Is the duty placed on the insured to take all possible steps to minimise the loss to the insured property after an unforeseen event
The insured must not neglect his property or behave irresponsibly during a loss event just because his property is insured
