Understanding the seven basic principles of insurances

The main objectives of every insurances contract is to give financial security and protection to the insured from any future uncertainties. The insured must never ever try to misused this safe financial cover.

Seeking profit opportunities by reporting false occurrences violate the terms and condition of an insurance contract. This breaks trust, results in breaching of a contract and invities legal penalities. An insurer must always investigate any doubtable insurances claim.

The seven principles of insurances are :-

1.       Principle of uberrimae fidei (utmost good faith)

Principles of uberrimae fidei (latin), or in simple English words, the principles of utmost good faith, is the very basic  and first primary principle of insurances. According to this principle, the insurances contract must be signed by both parties (i.e insurer and insured ) in an absoulate good faith or belief  or trust. The principle of uberrimame  fidei applies to all types of insurance  contracts.

2.        Principle of insurable interest

 The principle of insurable interest states that the person getting insured must have insurable interest in the objective of insurances. A person has an insurable interest when the physical existence of the insured object gives  him some gain but its non- existances will give him loss. In simple words, the insured person must suffer some financial loss by the damaged of the insured objective.

3.       Principle of contribution.

Principle of contribution is corollsary of the principle of the principle of indemnity. It applies to all contracts of indemnity, if the insured has taken out more than one policy on the same subjet matter.

4.       Principle of subrogation

Subrogation means ssubstituting one creditor for another. Principle of subrogation is an extension and another corollary of the principle of indemnity. Its also applies to  all contract of indermnity.

5.       Principle of loss minimization.

According to the principle of loss minimization, insured must always try his level best to minimize the loss of his insured property, in case of uncertain events like a fire outbreak or blast, e.t.c.  hences  it is a responsibility of the insured to protect his insured property and avoid further losses.

6.       Principle of cause proxima (nearest cause)

Principle of cause proxima ( a latin phrase ), or in simple English words, the principle of proximate (i.e nearest). The principle state that to find out whether the insurer is liable for the loss or not, the proximate (closest) and not the remote (farthest) must be look into.

7.       Principle of indemnity

Indemnity means security, protection and compensation is given  anganist damage, loss or injury. According to the principle of indemnity, an insurances contract is signed only for  getting protection against to future uncertanities.