Cartera De Inversiones

Understanding Principles of Insurance
The main objective of every insurance contract is to give financial security and protection to the insured from any future uncertainties. Insured must never ever try to misuse this safe financial cover.
Seeking profit opportunities by reporting false occurrences violates the terms and conditions of an insurance contract. This breaks trust, results inbreaching of a contract and invites legal penalties.

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An insurer must always investigate any doubtable insurance claims. It is also a duty of the insurer to accept and approve all genuine insurance claims made, as early as possible without any further delays and annoying hindrances.

Seven Principles of Insurance With Examples

The seven principles of insurance are :-1. Principle of Uberrimae fidei (Utmost Good Faith),
2. Principle of Insurable Interest,
3. Principle of Indemnity,
4. Principle of Contribution,
5. Principle of Subrogation,
6. Principle of Loss Minimization, and
7. Principle of Causa Proxima (Nearest Cause).

1. Principle of Uberrimae fidei (Utmost Good Faith)

Principle of Uberrimae fidei (a Latin phrase), or insimple english words, the Principle of Utmost Good Faith, is a very basic and first primary principle of insurance. According to this principle, the insurance contract must be signed by both parties (i.e insurer and insured) in an absolute good faith or belief or trust.
The person getting insured must willingly disclose and surrender to the insurer his complete true information regarding the subjectmatter of insurance. The insurer's liability gets void (i.e legally revoked or cancelled) if any facts, about the subject matter of insurance are either omitted, hidden, falsified or presented in a wrong manner by the insured.
The principle of Uberrimae fidei applies to all types of insurance contracts.

2. Principle of Insurable Interest

The principle of insurable interest states that theperson getting insured must have insurable interest in the object of insurance. A person has an insurable interest when the physical existence of the insured object gives him some gain but its non-existence will give him a loss. In simple words, the insured person must suffer some financial loss by the damage of the insured object.
For example :- The owner of a taxicab has insurable interest inthe taxicab because he is getting income from it. But, if he sells it, he will not have an insurable interest left in that taxicab.
From above example, we can conclude that, ownership plays a very crucial role in evaluating insurable interest. Every person has an insurable interest in his own life. A merchant has insurable interest in his business of trading. Similarly, a creditor has insurableinterest in his debtor.

3. Principle of Indemnity

Indemnity means security, protection and compensation given against damage, loss or injury.
According to the principle of indemnity, an insurance contract is signed only for getting protection against unpredicted financial losses arising due to future uncertainties. Insurance contract is not made for making profit else its sole purpose is togive compensation in case of any damage or loss.
In an insurance contract, the amount of compensations paid is in proportion to the incurred losses. The amount of compensations is limited to the amount assured or the actual losses, whichever is less. The compensation must not be less or more than the actual damage. Compensation is not paid if the specified loss does not happen due to a particularreason during a specific time period. Thus, insurance is only for giving protection against losses and not for making profit.
However, in case of life insurance, the principle of indemnity does not apply because the value of human life cannot be measured in terms of money.

4. Principle of Contribution

Principle of Contribution is a corollary of the principle of indemnity. It applies to...