Principles of Insurance

CA Manish K Dhoot (CA, B. Com, NCFM, CPCM) (5015 Points)

12 August 2010  

 

Principles of Insurance

 

 

Insurance - Definition

 

 

The contract of Insurance is a promise of compensation for certain potential future losses in exchange for a periodic payment [known as premium]. Insurance is intended to protect the financial well-being of an individual or a company or any other entity in case of unexpected loss. An agreement to the terms of an insurance policy creates a contract between the insured and the insurer. In exchange for the premiums paid by the insured, the insurer agrees to pay the policy holder a certain sum of money upon the occurrence of a specific event or on maturity. In most cases, the policy holder pays part of the loss (called the deductible), while the insurer pays the rest. Examples include health insurance, car insurance, life insurance, disability insurance, and business insurance.

 

 

Main principles of Insurance:

 

 

  • Utmost good faith

  • Indemnity

  • Subrogation

  • Contribution

  • Insurable Interest

  • Proximate Cause