1. Insurance Interest: These principles state that one can easily insure properties which if damaged or lost will make one suffer personal loss. The principles state that one can only insure the properties that belong to him/her. So one cannot insure his friend’s car because the person has no ownership or legal claim to the car.
2. IndemnityIn the indemnity clause, one party commits to compensate another party for any prospective loss or damage. More: This principle refers to the compensation given to the owner of the property (insuredThe insured is the party (ies) (person or firm) having property covered against risk. They are covered by an insurance policy. More) by the insurance company (insurerAn insurer is usually a company but can be a person, that provides financial support in the case of specific bad events listed in an insurance policy. e.g NICON insurance company,... More) in the event of his suffering a specified loss or damage.
3. Utmost Good FaithThe principle of utmost good faith, also known as "uberrimae fidei" or "uberrima fides", states that the insurer and insured both must be transparent and disclose all the essential information required... More (uberrimae fidei): This principle advocates that each of the parties must disclose all the material facts which might influence any party’s willingness to make the contract or reject it. The insured has the duty to disclose material facts and not make fraudulent claims.
4. Abandonment: This principle of insurance emphasizes the fact that if the cost of repairing the property damaged is higher than the actual value then it has to be abandoned. The insurance company reserves the right to abandon the property and submit financial indemnities to the insured to the tune of his total loss.
The goods insured may be abandoned in such cases as;
i. The actual loss appears to be unavoidable.
ii. If the cost of repairs will be more than the value.
5. SubrogationSubrogation is when you file a claim with your insurer, the company can try to recover its costs from the person responsible for your injury or property. It occurs when your... More: This principle states that the insurer has the right to step into the insurer’s shoes if the insurer has been paid the whole loss sustained. He is entitled to enforce the rights which would have been available to the insured against the third party.
6. Proximate Clause: The principle states that there must be a close connection between the loss actually suffered and the risk for which insurance has been taken out. The insurance company will not be liable if risks other than those insured are involved. At the time of filing the proposal form, if the names of Agness and success are stated as some of those that will drive an insured car, and the car was involved in an accident when Mr Best was driving it, the insurance company will not pay because Mr Best was not mentioned in the form.
7. Contribution: The principle of contribution provides that if an object is insured with more than one insurance company, the amount claimable from individual insurers will be limited to their individual rateable proportion of the loss. This clause makes it difficult for the insured to recover the full amount of his loss from each insurer.
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