In This Article i Will Tell You About the Principles of Insurance.
I think that you already know that the insurance is a very important part of our lives. Having an insurance is a guarantee of safety, especially when something unexpected happens. In this article, I would like to tell you about the basic principles of insurance that will help you better understand its essence.
Friends whether you are a student or an insurance buyer or an insurance agent, you shall be aware about the principles of insurance. In this article I will explain the principles of insurance in a very easy and lucid way. You will use real life demonstrations to prove your points about the principles.
PRINCIPLE OF UBERRIMAE FIDEI (UTMOST GOOD FAITH)
YOU SHALL NOT FIND ANY INFORMATION ASKED BY THE INSURANCE COMPANY. SO YOU SHALL CORRECTLY INFORM ABOUT:
- YOUR HEALTH – We need to know about your health history, this means any preexisting conditions you have, any medicines you are taking etc.
- INCOME – You should also tell correctly about your income.
- FMAILY HISTORY – You should also tell correctly about your family history, like if any of your parents or your siblings have suffered from any kind of disease etc.
- YOUR AGE – You should also tell correctly about your age, generally you have to produce any document which contains the date of birth.
- WHRE DO YOU WORK – You should also tell correctly about your age, generally you have to produce any document which contains the date of birth.
PRINCIPLE OF INSURABLE INTEREST
Roughly 6.75 million people get into car accidents every day, while 16,750 people get run over by cars and 13,500 people sustain injuries after being hit by cars in the U.S. If you were to incur any of these types of injuries or damages to your property as a result of such an accident happening to you on a daily basis, it could potentially financially cripple you by making it difficult for you to afford the medical treatment that you might need after getting into such an accident. This is where insurance comes in: Insurance covers the expenses associated with this type of event so that you do not have to worry about paying those yourself!
Returning home from work one day, you find that your neighbour’s son was climbing over your fence for a dare and had fallen headfirst into a cement pot! You rush him to the hospital, but he passes away shortly after arriving. Your neighbourhood gathers to grieve his death. It has been difficult since that day and you’ll never be able to forgive yourself for such an accident. Superfluous Insurance doesn’t exist. Insure as much of your assets as you can in order to reduce risk of loss and save some money too! Insuring friends’ assets, however, is not possible since they fall into the same category as our own assets: if they’re insured then we are insured, which creates what is called “symmetry of risk”.
PRINCIPLE OF INDEMNITY
According to this principle, insurance is not made for making profit,
- but it is made for compensating you against the loss that has incurred to you.
- That means compensation paid cannot be more than the losses incurred, a person earning rupees 5 lakh a year cannot take insurance plan of rupees 500 crore.
- Or you cannot take car insurance of rupees 10 lakh for a car pricing Rupees 500000.
This is the reason insurance companies do not provide term insurance to an unemployed person, or a housewife, or a student.
PRINCIPLE OF CONTRIBUTION
Next principle is principle of contribution. This principal is similar to two-for-one deals. Whenever there are two different items that would normally be ordered separately, they can often be bought together at a discount price. Than two insurers for the same underlying property or asset. In this case the insurance company has the right to share the loss with other insurancers.
Coming in with a dual plan allows you to receive double the amount of compensation if need be. suppose you have taken an insurance of rupees 10 lakh from company a, and another of rupees 10 lakh from company b. if a fire occurs and your losses total up to rupees 10 lakh, you will be able to collect the full amount equal to your initial investment in both insurance policies, effectively doubling your money!
However, now the insurance company number one will approach the other insurer, and ask for 500000 rupees. Because both the insurance companies had equal share in your property.
PRINCIPLE OF SUBROGATION
If the insured pays the insurance company to take over their property or the insurance company pays for a renter’s belongings, depending on the policy language, then the ownership of these items will be transferred to the insurance company. After this happens, if something is stolen from you as an insured, for example your bike, you would have no legal rights to request your property be returned to you. For example: “If your bike is stolen and the insurance company has paid you your check in full – because their policy and yours did not include a right of recovery – if your bike later gets found, they would not pay you any of the settlement amount that they received from your theft claim.”
Subrogation. Under this principle, once the insured is given compensation for their losses then the ownership rights to the lost property are passed over to the insurance. You cannot take advantage of damaged assets as if you are still in possession of them. For example, if your bike or car is stolen and the insurance company pays you back for it, thereupon you will no longer have any ownership rights over what was lost. If after some time the insurance company happens upon your stolen bike or car and sells them off, you cannot be blamed for it thereafter because you were already compensated for the claim in full.
PRINCIPLE OF LOSS MINIMIZATION
The principle of loss minimization is crucial. It’s a principle that we here at insurancecompanies.com live by every day and one that we highly recommend to you as well! If you frequently use your car for work or leisure purposes then it’s wise to invest in some canine insurance cover so that if your pooch should get lost, stolen, or injured, you don’t have to worry too much about the cost of getting him back on his feet again.
If there is fire in your car, you should immediately call the fire brigade or if you have water or fire extinguisher you should use them, so that the loss can be minimized. You cannot simply sit and watch, feeling that you have already get them insured and the insurance company will pay you the compensation for the damage.
PRINCIPLE OF CAUSA PROXIMA (NEAREST CAUSE)
Next principle is principle of Causa Proxima (Nearest Cause). According to this principle if your loss has caused because of two things, if that was the case, then the party who contributed to it should be held responsible. insurance. For example, there is a ship and the Rat have made hole in it, because of which water entered into the ship. And the goods loaded in the ship have damaged.
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