Terms as used in insurance

Short notes:

  1. Indemnity : A principle of insurance which states that an individual should only be compensated upto the actual monetary loss caused by the event insured against.  The maximum one can get is the value of the property insured when there is total loss caused by the risk insured against.  Hence the insured should never benefit / gain.
  2. Utmost good faith – this principle requires that the insured person must disclose all the material facts about the insured property to the insurance company.
  3. Proximate cause – This principle states that for an insurer to be liable, the loss must be dominantly and effectively resulting from a risk for which the insurance policy was taken out.
  4. Insurable interest –  This principle states that an insurance claim cannot be valid unless an insured person can prove that he has suffered a financial loss because the insured event has occurred.  The insured person must not gain from the occurrence of the insured event hence should only insure upto the amount that you can claim when the event occurs.
  5. Subrogation –  This principle maintains that after the one insurer has indemnified the insured, the rights in the remains of the damaged proper by pass on to the insurer

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