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Business Studies

Write short answers for the following : 
What are the principles of insurance?

SOLUTION
Following are the principles of an insurance contract:-

1. Utmost good faith: A contract of insurance is based on the principle of utmost good faith. This means that the insurer and the insured should disclose all the facts related to the insurance contract to each other voluntarily.

2. Insurable interest: It states that the insured must have an insurable interest in the subject matter of insurance. It means that he should suffer a loss in case of damage to the thing insured.

3. Indemnity: The insurer should undertake to indemnify the insured for any loss to the thing insured.

4. Subrogation: The insurer must step into the shoes of the insured at the time of compensating him for the damage.

5. Mitigation: It is the duty of the insured to try to minimize the loss occurred to the thing insured.
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