Unit+1.5+Important+principles+of+insurance

=Important principles of insurance=

Insurable Interest
A person making a claim on an insurance policy must have an insurable interest. A business man who insures his shop against fire has an insurable interest because if his shop catches fire, he will suffer losses. This means a person who does not own the property cannot take out insurance to cover that property. This principle prevents insurance from being used as a means of gambling on another's misfortune.

Utmost Good Faith
When a person takes out insurance on his belongings, he has to complete a proposal form with many details. He has to give correct and up-to-date information on the form without withholding anything or telling lies. This is important because an insurance company will have to decide whether to accept a risk or not .If the insured fails to disclose the required information, the insurance company may reject his claim.

Indemnity
If an insured suffers a loss, he or she will be compensated based on the principle of indemnity. According to this principle, the insured is not allowed to make a profit out of the loss. The ultimate aim of this principle is to restore the insured to the position before he or she has incurred the loss.