Principles Of Insurance

Question 1

What are the seven principles of insurance?

Answer 1

Insurable interest 
Indemnity
Subrogation 
Contribution 
Utmost good faith 
Proximate cause
Loss minimisation

Question 2

Insurable interest

Answer 2

Insurance interest is the legally recognised relationship between insured on the subject matter of the insurance

Question 3

For insurable interest what must exist?

Answer 3

The relationship between the insured and the subject matter of the insurance must be legal

The insured must stand to lose

Question 4

Legally recognise relationships of Insurable interest?

Answer 4

Owners and joint owners
Executors
Trustees

Question 5

Indemnity

Answer 5

Indemnity is the financial compensation sufficient to place the insured in the same financial position after the loss as they enjoyed immediately before it

Question 6

What is the purpose of an insurance contract for indemnity?

Answer 6

Not for making a profit but to give compensation in any event of any damage or loss

Question 7

Utmost-good faith 

Answer 7

A positive duty voluntary to disclose accurately and fully all facts material to the risk whether requested or not

Question 8

What facts do not need to be disclosed?

Utmost-good faith

Answer 8

Facts of law
Spent convictions 
Facts of public knowledge
Facts which lessen risk 
Facts where the insured has wavered the right to information

Question 9

Subrogation

Answer 9

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

Question 10

How can Subrogation arise?

Answer 10

Tort, contract statute and subject matter

Question 11

Tort

Answer 11

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

Question 12

Statute

Answer 12

Declarative policy or law that has been passed by legislative authority

Question 13

Contract

Answer 13

Illegal agreement that spells out the responsibilities of both insurance company and the insured

Question 14

Subject matter

Answer 14

Insurers pay out and put you back in the position you started. Insurers will keep the salvage as the subject matter.

Question 15

Contribution

Answer 15

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

Question 16

What must happen for contribution to take place?

Answer 16

2 or more policies in place
The policies must cover a common peril
Policies must cover the same subject matter

Question 17

Proximate cause

Answer 17

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

Question 18

Loss minimisation

Answer 18

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