THE DEFINITION OF INSURANCE

THE DEFINITION OF INSURANCE

The DEFINITION of insurance insurance can generally be described as a method of sharing some of the financial losses from the General Fund that are equally exposed to the same loss. Insurance is defined as the transfer of the risk of a loss, from one entity to another, in Exchange for a premium, fair and can be considered a guaranteed small loss to prevent a large,possibly devastating loss

PRINCIPLES OF INSURANCE

1. THE UTMOST GOOD FAITH of both parties between the insurer and the insured must be good faith towards each other. Insurance companies must provide full information, true and clear of the insured subject. Insurance companies must provide full information, true and clear the insured regarding terms and conditions of the contract. This principle applies to all contracts of insurance i.e. life, fire and marine insurance.
2. INSURABLE INTEREST The insured must have insurable interest in the subject matter of insurance. The owner of the party is said to have insurable interest as long as he is the owner of the it. It is applicable to all contracts of insurance
3. PRINCIPLE OF INDEMNITY Indemnity means a guarantee or assurance to put the insured in the same position in which he was immediately prior to the happening of the uncertain event. The insurer undertakes to make good the loss. It is applicable to fire ,marine and other general insurance. Under
4.  this principle the insurer agrees to compensate the insured for the actual loss suffered.
5. PRINCIPLE OF CONTRIBUTION The principle is a corollary of the principle of indemnity. It is applicable to all contracts of indemnity. Under this principle the insured can claim the compensation only to the extent of actual loss either from any one insurer or all the insurers.
6. PRINCIPLE OF SUBROGATION As per this principle after the insured is compensated for the loss due to damage to property insured , then the right of ownership of such property passes on to the insurer. This principle is corollary of the principle of indemnity and is applicable to all contracts of indemnity.
7. PRINCIPLE OF LOSS OF MINIMIZATION Under this principle it is the duty of the insured to take all possible steps to minimize the loss to the insured property on the happening of uncertain event.
8. PRINCIPLE OF ‘CAUSA PROXIMA’ The loss of insured property can be caused by more than one cause in succession to another. The property may be insured against some causes and not against all causes. In such an instance, the proximate cause or nearest cause of loss is to be found out. If the proximate cause is the one which is insured against, the insurance company is bound to pay the compensation and vice versa.