Principle of insurance

Question

Accepted Answer

Principle of insurance is the basic concept that governs the insurance industry.

Principle of utmost good faith - both parties should disclose all relevant information
Principle of insurable interest - the insured must have a financial interest in the subject matter of the insurance
Principle of indemnity - the insured should be compensated for the actual loss suffered
Principle of contribution - if the insured has multiple policies covering the same risk, each insurer should contribute proportionally
Principle of subrogation - the insurer can take legal action against a third party responsible for the loss
Principle of proximate cause - the loss must be caused by an insured peril
Principle of mitigation - the insured should take reasonable steps to minimize the loss
Principle of premium - the insurer charges a premium in exchange for assuming the risk
Principle of deductibles - the insured pays a portion of the loss before the insurer pays the rest