1. Principle of Indemnity
Example: If you have a four year motorcar and it is damaged, the insurance company will only give you the current value not the value when it was new.
2. Principle of Insurable Interest
• You can insure your own home , but not your friend’s home.
• In the same way you can take out Assurance on your wife’s life, but not that of your neighbour.
3. Principle of Utmost Good Faith
• If the loss occurs, they will check the facts and if in-accurate details have been given they will not pay damages to incurred.
• If the policy terms does not satisfy the customer they will not take that policy as insurance.
4. Principle of Contribution
Example: If a man losses his watch during holiday and has its risk cover under household policy and also has a travel policy from some other company then both companies will share the claim amount but not more than indemnity.
5. Principle of Subrogation
Example: An electric goods business man lost some property due to faulty toaster and claims for compensation from an insurance company. He will not be allowed to complain and claim compensation from the manufacturer instead insurance company will do on his behalf and will get the compensation from manufacturer after it pays off claim to the business man.
6. Principle of Mitigation of Loss
7. Principle of Causa Proxima
Example: A man keep his furniture outside during a fire in his house and the furniture gets rotten due to rain then inspection will be done by insurer whether-
• Rainfall began just after the fire or after some time of extinguishing it (then main peril is fire).
• Or, due to keeping it for long outside even after fire was extinguished and in between rain damaged it (claim would not be entertained).
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