The purpose of getting yourself insured is to guarantee compensation for specified loss, damage, illness, or death. It is important for you to prepare against any eventualities, and when doing this, you want to do it right.
Unfortunately, many people dabble into insurance agreements without equipping themselves with sufficient knowledge as to how it works; the necessary 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, in other words, non-negotiable factors in your contract. This ensures your legal standing on the occasion of any mishap.
What are these Principles of insurance?
1. 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.
2. The Principle of Insurable Interest
This principle provides that the insured must ensure that the subject of the agreement has some financial worthiness. This makes its existence important such that any destruction or damage to it would be a significant loss.
It roots this principle because they form a contract based on the financial interest of the object to be insured. Therefore, an insured person should know that the financial worth of the property is not the only important factor. Legal ownership or the subject matter is much more important.
3. The principle of Proximate Cause
According to this principle, the insured must provide the insurer with specific instances that might occur. These instances could 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 instance that links or connects to it.
Therefore the insurer is under no obligation to cover losses accruing from unrecorded/unstated circumstances an insured person cannot sue the insurance company for not compensating him/her for a loss which he/she had failed to provide for its possibilities.
4. 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.
5. The principle of Subrogation
This principle provides an insurance company with the right to claim compensation, on behalf of an insured person, from a third party who is responsible for the loss or damage.
This is applicable most especially when such damage was as a result of negligence or recklessness on the part of the third party.
However, this principle/right can only be effected when the insured person has already been indemnified/compensated for the loss by the insurer.
6. The Principle of Contribution
This is an extension of the principle of indemnity. It provides that where an insured person covers insurance on a particular subject matter in two or more insurance companies, each policy gets to pay their proportion of whatever loss or damage incurred.
7. The Principle of Loss Minimization
While the insurance company must provide compensation for loss or damage, they expect the insured person to make conscious efforts to minimize and control the weight/magnitude of the possible loss or damage that might come to the subject matter such that it (I.e the loss or damage) 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 the expert opinion or advice of a legal practitioner or attorney is required, do not hesitate to make the call.