Principles

All Insurance is governed by the following principles:

Insurable Interest Utmost Good Faith Indemnity

• Insurable Interest

A person who wishes to take out insurance must gain from the existence of what is being insured and suffer from its loss.

• Utmost Good Faith

All facts must be revealed.  The person taking out the insurance must answer all the questions truthfully.  Failure to do so can make the insurance cover worthless.

• Indemnity

An insured person cannot gain from insurance i.e. insurance can at best put an insured person in the same financial position as they were prior to a loss occurring.  

The principle of indemnity has 2 sub-principles:

• Subrogation

Once an insurance company pays out compensation it becomes the owner of the item insured.  The rights the insured person had in relation to seeking compensation from a third party pass over to the insurance company. 

• Contribution

When the same risk is insured by more than one insurance company each company will only pay a proportion of any compensation.