Principles of Insurance - Legal

Principles of Insurance - Legal

When a company insures an individual entity, there are basic legal
requirements. Several commonly cited legal principles of insurance
include:[3]

1.Indemnity – the insurance company indemnifies, or compensates, the
insured in the case of certain losses only up to the insured's
interest.
2.Insurable interest – the insured typically must directly suffer from
the loss. Insurable interest must exist whether property insurance or
insurance on a person is involved. The concept requires that the
insured have a "stake" in the loss or damage to the life or property
insured. What that "stake" is will be determined by the kind of
insurance involved and the nature of the property ownership or
relationship between the persons.
3.Utmost good faith – the insured and the insurer are bound by a good
faith bond of honesty and fairness. Material facts must be disclosed.
4.Contribution – insurers which have similar obligations to the
insured contribute in the indemnification, according to some method.
5.Subrogation – the insurance company acquires legal rights to pursue
recoveries on behalf of the insured; for example, the insurer may sue
those liable for insured's loss.
6.Causa proxima, or proximate cause – the cause of loss (the peril)
must be covered under the insuring agreement of the policy, and the
dominant cause must not be excluded
7.Mitigation - In case of any loss or casualty, the asset owner must
attempt to keep the loss to a minimum, as if the asset was not
insured.