Insurance is a contract, a danger transfer mechanism whereby a organization (Underwriter) promised to compensate or indemnify an additional celebration (Policyholder) upon the payment of affordable premium to the insurance organization to cover the subject-matter of insurance. If you are nicely conversant with these ideas, you will be in a better position in negotiating you insurance demands.
1. Insurable interest. This is the economic or monetary interest that the owner or possessor of property has in the topic-matter of insurance. The mere reality that it might be detrimental to him need to a loss occurred simply because of his economic stake in that assets offers him the capability to insure the home. Castellin Vs Preston 1886.
2. Umberima fadei. It means utmost great faith, this principle stated that the parties to insurance contract ought to disclose accurately and completely all the facts material to the threat becoming proposed. That is to say that the insured should make known to the insurer all details with regards to the risk to be insured (Looker Vs Law Union and Rock 1928). Likewise, the underwriter need to highlight and clarify the terms, situations and exceptions of the insurance policy. And the policy should be void of ‘small prints’.
3. Indemnity. It stated that following a loss, the insurer should guarantee that they placed the insured in the precise monetary position he enjoyed prior to the loss (Leppard Vs Excess 1930).
4. Contribution. In a situation where two or far more insurers is covering a particular danger, if a loss occurred, the insurers need to contribute towards the settlement of the claim in accordance with their rateable proportion.
5. Subrogation. It has usually been said that contribution and subrogation are corollary of indemnity, which means that these two principles operates so that indemnity does not fail. Subrogation operates primarily on motor insurance. When an accident occurred involving two or far more cars, there need to be tortfeasor(s) who is responsible for accident. On this basis, the insurer covering the policyholder who was not at fault can recover their outlay from the underwriter of the policyholder who is responsible for the incidence.