Insurance is a contract, a risk transfer mechanism in which a company (underwriter) promises to compensate or compensate another party (policyholder) on the payment of a reasonable premium to the insurance company to cover the subject of insurance. If you are well acquainted with the principles, you will be in a better position in negotiating her insurance needs.
1. Insurable interest. This is the financial or monetary interest that the owner or property owner has in the subject of insurance. The only fact that it could be harmful for him if a loss occurred because of his financial stake in the assets, could be insuring the property. Castellin v. Preston 1886.
2. Umberima fadei. This principle states that there is maximum good faith that the parties to the insurance contract must accurately and comprehensively disclose all the facts that are material to the offered risk. This is to say that the insured needs to know the insurer all facts about the risk to be insured (Looker Vs Law Union and Rock 1928). Likewise, the underwriter must highlight and explain the terms, conditions and exceptions of the insurance policy. And the policy must be void of ‘little princes’.
3. Indemnity. It stated that after a loss, the insurer should ensure that they put the insured in the exact financial position he enjoyed before the loss (Leppard Vs Excess 1930).
4. Contribution. In a situation where two or more insurers covering a particular risk, if a loss has occurred, the insurers must contribute to the solution of the claim in accordance with their ratios.
5. Subrogation. It is often said that contribution and subrogation are the resolution of income, which means that the two principles operate so that the indemnity cannot fail. Subrogation operates mainly on motor insurance. When an accident occurred with two or more vehicles, there must be tortfeasor (s) responsible for accident. On this basis, the insurer covering the policyholder who was not at fault, can recover their layout from the underwriter of the policyholder who is responsible for the incidence.