explain any three principles of insurance and with examples
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1) Principal of Utmost Good FaithBoth parties, insurer and insured should enter into contract in good faithInsured should provide all the information that impacts the subject matterInsurer should provide all the details regarding insurance contractFor example - John took a health insurance policy. At the time of taking policy, he was a smoker and he didn't disclose this fact. He got cancer. Insurance company won't pay anything as John didn't reveal the important facts.
2) Principle of Insurable InterestInsured must have the insurable interest on the subject matterIn case of life insurance spouse and dependents have insurable interest in the life of a person. Corporations also have insurable interests in the life of it's employeesIn case of life or marine insurance, insured must be the owner both at the time of entering of entering into the insurance contract and at the time of accident.
3) Principle of IndemnityInsured can't make any profit from the insurance contract. Insurance contract is meant for coverage of losses onlyIndemnity means a guarantee to put the insured in the position as he was before accidentThis principle doesn't apply to life insurance contracts
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2) Principle of Insurable InterestInsured must have the insurable interest on the subject matterIn case of life insurance spouse and dependents have insurable interest in the life of a person. Corporations also have insurable interests in the life of it's employeesIn case of life or marine insurance, insured must be the owner both at the time of entering of entering into the insurance contract and at the time of accident.
3) Principle of IndemnityInsured can't make any profit from the insurance contract. Insurance contract is meant for coverage of losses onlyIndemnity means a guarantee to put the insured in the position as he was before accidentThis principle doesn't apply to life insurance contracts
Hope it helps!!
Cheers!!
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1) Principal of Utmost Good Faith
Both parties, insurer and insured should enter into contract in good faithInsured should provide all the information that impacts the subject matterInsurer should provide all the details regarding insurance contract
For example - John took a health insurance policy. At the time of taking policy, he was a smoker and he didn't disclose this fact. He got cancer. Insurance company won't pay anything as John didn't reveal the important facts.
2) Principle of Insurable Interest
Insured must have the insurable interest on the subject matterIn case of life insurance spouse and dependents have insurable interest in the life of a person. Corporations also have insurable interests in the life of it's employeesIn case of life or marine insurance, insured must be the owner both at the time of entering of entering into the insurance contract and at the time of accident.
3) Principle of Indemnity
Insured can't make any profit from the insurance contract. Insurance contract is meant for coverage of losses onlyIndemnity means a guarantee to put the insured in the position as he was before accidentThis principle doesn't apply to life insurance contracts
4) Principle of Contribution
In case the insured took more than one insurance policy for same subject matter, he/she can't make profit by making claim for same loss more than once
For example - Raj has a property worth Rs.5,00,000. He took insurance from Company A worth Rs.3,00,000 and from Company B - Rs.1,00,000.
In case of accident, he incurred a loss of Rs.3,00,000 to the property. Raj can claim Rs. Rs.3,00,000 from A but after that he can't make profit by making a claim from Company B. Now Company A can make a claim from Company B to for proportional loss claim value.
Both parties, insurer and insured should enter into contract in good faithInsured should provide all the information that impacts the subject matterInsurer should provide all the details regarding insurance contract
For example - John took a health insurance policy. At the time of taking policy, he was a smoker and he didn't disclose this fact. He got cancer. Insurance company won't pay anything as John didn't reveal the important facts.
2) Principle of Insurable Interest
Insured must have the insurable interest on the subject matterIn case of life insurance spouse and dependents have insurable interest in the life of a person. Corporations also have insurable interests in the life of it's employeesIn case of life or marine insurance, insured must be the owner both at the time of entering of entering into the insurance contract and at the time of accident.
3) Principle of Indemnity
Insured can't make any profit from the insurance contract. Insurance contract is meant for coverage of losses onlyIndemnity means a guarantee to put the insured in the position as he was before accidentThis principle doesn't apply to life insurance contracts
4) Principle of Contribution
In case the insured took more than one insurance policy for same subject matter, he/she can't make profit by making claim for same loss more than once
For example - Raj has a property worth Rs.5,00,000. He took insurance from Company A worth Rs.3,00,000 and from Company B - Rs.1,00,000.
In case of accident, he incurred a loss of Rs.3,00,000 to the property. Raj can claim Rs. Rs.3,00,000 from A but after that he can't make profit by making a claim from Company B. Now Company A can make a claim from Company B to for proportional loss claim value.
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