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The basic principles of insurance are:

 

Insurable Interest


Good Faith and the Duty Of Disclosure


Indemnity


Contribution


Subrogation

 

The client needs to have a basic knowledge of the principles on which the insurance is founded. We will try and explain these in simple terms.


INSURABLE INTEREST

Insurable interest is the legally recognised relationship between the insured and the financial loss he suffers following a loss. For example you can insure your car against accidental damage because if it is involved in an accident you will suffer a financial loss.

Only financial losses are insurable.


GOOD FAITH AND THE DUTY OT DISCLOSURE

When a person proposes to take out insurance, he must give the insurance company or underwriter, full details about the risk that he wants to insure. This is called acting in good faith. It is important to give the insurer all the facts pertaining to the risk.

The insurer will use the facts to decide on the premium, the terms and conditions and even whether to accept the risk or not.