7 Principles of Insurance with Examples
In this article, you will discover the principles of insurance. Insurance is related to protection from financial loss. It is a kind of risk management. Primary used to hedge against the risk of uncertain loss. Insurance is a deal between the insurer and the insured, where the insurer agrees to pay the insured against loss. The insured has to give some fixed money on a timely basis to the insurer.
Insurance companies reinvest insured amounts in different avenues in order to make a profit.
Some basic terms in insurance before knowing principles
- Insured: The person who is defended against some losses. Insured is called as assured in the case of life insurance contracts. he is the policy owner.
- Insurer: The person who agrees to compensate against loss for a consideration. The insurer is known as an assurer in life insurance contracts.
- Claim: It is a request made by the ( protected ) insured to the insurer to compensate for the loss that happened due to the accident.
- Subject Matter: It is related to life, property, cargo or ship, etc. which is insured against policy.
- Policy: The statement of the agreement between the insurer and the insured. It includes the terms and conditions of service.
Principles of Insurance
1. Principle of Utmost good faith:
2. Principle of Insurable interest:
- A person has an insurable interest in his own life and property.
- A business has an insurable interest in the goods it deals with and in the property of the business.