Sunday, 10 November 2013


Some principles of Insurance

Insurance is a cooperative method of spreading the loss resulting from a particular risk over a number of persons who are exposed to it and who agree to ensure themselves against it by paying an amount of money to the common pool. The principles of insurance are given blow:
1.Principle of utmost good faith: utmost good faith refers to the act of providing all the information clearly by the insured and insurer to each other. Insured should clearly stat the information regarding the property or life.

2. Principles of Indemnity: insurance provides compensation equivalent to the amount of loss which is known as principles of indemnity. Insurance company doesn't provide profit to the insured.

3.Principle of insurable interest: it is the most important principle of insurance. It plays significant role in insurance business. This principle says that the protection of insured property generates the benefit to the insured and if such property is lost, insured suffers.

4.Principle of contribution: insured can make insurance of a property from more than one company. In the loss of such property, insured can get compensation from more than one company.

5. Principle of probability: probability refers to the event which may or may not take. The principle predicts the possibility of events in future on the basis of past experience, knowledge and exerts.

6.Principle of proximate cause: There may be more than one cause for any event. If there is more than one cause for the losses, insurance company finds out the nearest causes and if such cause is within the scope of insurance, insurance company provides compensation.

7.Principle of warranties: The terms and conditions which are imposed while making insurance contract in addition to general terms are known as warranties. Both parties should follow such terms and conditions.

8.Principle of mitigation of loss: Insured should try to save his property if incident takes place. It is known as principle of mitigation of loss. If the property is lost even though he doesn't try to save such properties, then he can’t get compensation from the insurance company.