1.The principle of utmost good faith

Insurance contract is said to be the contract of utmost good faith, in which the highest standard of honest is imposed on the parties than as imposed under the ordinary contract. The principle require parties to disclose all relevant material fact relevant to in making decision. It is the duty of the insurer to disclose all relevant fact about the insurance policy conditions and benefits. However, there some information which are not necessary to be disclosed such as the fact which are very common to the public, facts which reduce the level of risk, facts which have already surveyed by the insurer.

2.The principle of insurable interest

The insured (proposer) should give all data about the subject matter to the insured. This information include the information relating to the relationship between the proposer with the person or property insured

i.e the subject matter of the insurance. This relationship is known as insurable interest. The principle of insurable interest is importent during indemnification because the insured must be made good the loss that he has actually suffered.

This help to prevent the insurance from becoming a gabling contract.

3. Principle of indemnity

Indemnity means to make good the loss. An insurance contract relate to the making of payment for the happening of loss by the insured peril and not otherwise. The happening of the insured peril must be contingent.

4. The principle of proximate cause

This is the principle require that the causes of the loss must be connected with the insured peril. It provide that there is no need to go further after proving the effect of the cause. The law is concerns with the immediate causes of the insured peril/event and not remote cause of the insured event.

5.      Principle of contribution.

This principle refers to the sharing of loss between the co-insurers. Sometime the insured take insurance of policy from more than one insurance company against one loss and one interest in property. This is quite legal.

Essential elements of this principles:-
  • The insured should be the same for all contract
  • The policies should cover the same peril
  • All protect the same interest of the same insured
  • All policies should be in place when loss
6.      The principle of subrogation

Insurance law say after an insurer has paid a claim to insured person he is entitled to all rights and remedies of the insured in mitigating the loss. In simple subrogation means stepping into the shoes of the insured and take all the asset/ property for which the claim has been

 

paid. The insurance company is entitled to recover compensation from third party if any.

Limitation on the scope of insurance

  1. All risk cannot be insured. Insurance exist to combat risk, but not all risk which are covered by insurance. There must be insurable interest
  2. Insurance limited to financial value. The person seeking the insurance must be legally to insure the article or
  3. There must be large numbers of similar risks. Insurance can only provide monetary
  4. It must be possible to calculate the risk of loss
  5. Losses must be reasonably unexpected
  6. Losses must be accidental. Losses arising through the deliberate acts of the insured cannot be

ADVANTAGE OF INSURANCE

  1. Transfer of loss

The purpose of insurance is to transfer the financial loss to insurer who spreads it over larger numbers (policy holders). The loss suffered by one is distributed over many.

  1. As social security

Insurance provide social security to people.

  1. Development of economy

Insurance mitigates financial losses of the insured people, by theft, fire, loss of goods. Thus, insurance provides the continuity of trade which help for the growth of economy.

  1. Investment of insurance funds.

The insurance companies invest fund collected from the public in various instruments of economy of the country.

  1. It helps people to develop habit of saving and help to generate employment by giving working to insurance
PRINCIPLES OF INSURANCE
  1. The principle of utmost good faith

Insurance contract is said to be the contract of utmost good faith, in which the highest standard of honest is imposed on the parties than as imposed under the ordinary contract. The principle require parties to disclose all relevant material fact relevant to in making decision. It is the duty of the insurer to disclose all relevant fact about the insurance policy conditions and benefits. However, there some information which are not necessary to be disclosed such as the fact which are very common to the public, facts which reduce the level of risk, facts which have already surveyed by the insurer.

2.      The principle of insurable interest

The insured (proposer) should give all data about the subject matter to the insured. This information include the information relating to the relationship between the proposer with the person or property insured

i.e the subject matter of the insurance. This relationship is known as insurable interest. The principle of insurable interest is importent during indemnification because the insured must be made good the loss that he has actually suffered.

This help to prevent the insurance from becoming a gabling contract.

3.      Principle of indemnity

Indemnity means to make good the loss. An insurance contract relate to the making of payment for the happening of loss by the insured peril and not otherwise. The happening of the insured peril must be contingent.

4.      The principle of proximate cause

This is the principle require that the causes of the loss must be connected with the insured peril. It provide that there is no need to go further after proving the effect of the cause. The law is concerns with the immediate causes of the insured peril/event and not remote cause of the insured event.

5.      Principle of contribution.

This principle refers to the sharing of loss between the co-insurers. Sometime the insured take insurance of policy from more than one insurance company against one loss and one interest in property. This is quite legal.

Essential elements of this principles:-

 

  • The insured should be the same for all contract
  • The policies should cover the same peril
  • All protect the same interest of the same insured
  • All policies should be in place when loss
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1.The principle of utmost good faith Insurance contract is said to be the contract of utmost good faith, in which the highest standard of honest is imposed on the parties than as imposed under the ordinary contract. The principle require parties to disclose all relevant material fact relevant to in...