The purpose of getting yourself insured is to guarantee compensation for specified loss, damage, illness, or death. It is therefore important to get yourself saddled up enough to face any eventualities. And, when doing this, you must ensure to do it right. That is where the principles of insurance come in
Unfortunately, many people dabble into insurance agreements without equipping themselves with sufficient knowledge of how it works; the pros and cons, rules, and principles. This often lands them in certain unpleasant situations, ones that you most definitely do not want to experience.
This article provides you with the Principles of insurance. Those are the factors that must be present in your contract. Basically, to ensure your legal standing on the occasion of any breach or mishap.
What are these Principles of insurance?
The Principle of Utmost Good Faith:
This principle provides that we must make an insurance agreement on the premise of truth and honesty. Both parties must provide one another with every necessary information as regards the agreement.
Where a party breaches his right, it renders the agreement void and the other party has the right to sue.
The Principle of Insurable Interest:
This principle provides that the insured must ensure that the subject of the agreement has some financial worthiness and obtainable interest. This makes its existence quite important, such that any destruction or damage to it would be a significant loss.
Therefore, an insured person must have it in mind that not alone is the financial worth of the property important, his legal ownership or the subject is much more important.
The principle of Proximate Cause:
According to this principle, the insured must provide the insurer with specific instances or incidents that might probably occur which would cause the loss or damage of the subject. We know this as the proximate cause.
In such events, this principle provides that the insurer cannot function outside these instances or any other instances that may link or connect to it
Therefore, the insurer is under no obligation to cover losses accruing from unrecorded circumstances. In other words, an insured person cannot sue the insurance company for not compensating him or her for a loss that outside the agreement.
The principle of Indemnity:
We often refer to this as the most important part of the agreement. This principle provides the insured with a guarantee that when faced with an unexpected loss or damage, the insurer steps in to return the property to its status quo i.e its initial status before the loss or damage.
However, this principle does not apply to certain types of insurance policies e.g. life and health insurance.
The principle of Subrogation:
This principle provides an insurance company with the right to claim compensation on behalf of an insured person. This is from a third party who handles the loss or damage.
This is applicable most especially when such damage was because of negligence or recklessness by the third party.
However, this principle can only be effected when the insured person has already been indemnified/compensated for the loss by the insurer.
The Principle of Contribution:
This extends the principle of indemnity. It provides that where an insured person covers insurance on a particular subject in two or more insurance companies, each policy gets to pay their proportion. It is mandatory that they do this in the proportion to whatever loss or damage incurred.
The Principle of Loss Minimization:
While the insurance company must provide compensation for loss or damage, the insured person must make efforts to minimize potential loss. This is so that the damage or loss does not exceed the financial capacity of the insurance agreement.
With these principles present in your insurance agreements, you have absolutely nothing to worry about. However, it is important to note that where you need expert opinion or advice of a legal practitioner, do not hesitate to make the call.