Basic Principles of Insurance

Did you know that insurance has 6 basic principles that must be met by the customer / insured and the insurer / underwriter? These six basic principles will apply to any insurance products you buy:

     Insurable Interest (the right to insure)
     Utmost Good Faith (action to reveal the facts accurately and completely)
     Proximate Cause (cause most powerful, active and efficient cause harm)
     Indemnity (returns to the current financial position prior to the loss)
     Subrogation (transfer of right to sue from the insured / client to insurance)
     Contributions (other underwriter participating in compensation)

 

This time, Insurance Advice Online will explain the first principle,insurable interest.

What's insurable interest ?

The risks that can be insured must meet criteria that has value and can be measured financially, not in conflict with the law, having a pure risk which will cause a loss when it happens and happens without the risk of intentional and should have insurable interest in the insured parties.

Insurable interest is defined as a right to which arises due to the financial relationship / financial and recognized by law between the insured / client and the object to be insured, be it in the form of goods (property), and the legal responsibility or legal events that can cause loss.

What basic elements that must be met in the insurable interest:

1.      There must be objects, rights, interests, soul or liability which may be insured
2.      The things above the object must be insured
3.      Insured / customer must have a relationship with the insured object, where he gained benefits over   its integrity and suffer a loss on damage or loss of the insured object
4.      The relationship of the insured / client against the insured objects should be legally recognized

Then, how insurable interest is formed? To answer these questions, there are 3 things you should know:

1. Formed by law (at common law)

For example, ownership of homes and vehicles as evidenced by a certificate of ownership of the home and vehicle

2. Formed by contract

For example, employees who are under contract with the company to make the company responsible for the negligence of the employee on behalf of the company

3. Formed by law

For example, marriage laws that resulted in a husband is entitled to the benefit of insurance on his wife.
 

When is the insurable interest must exist?

Insurable interest must exist at the time of making the insurance policy and at the time of the loss. For example: when you insure a vehicle or home stay, you must legally own a vehicle or house. Similarly, in the event of a claim, you should also be able to prove that you still existed as the legal owner of the vehicle or home. For example, life insurance, policy beneficiaries / heirs appointed must be someone who has the insurable interest to you example: wife, children, and others.

The inability to meet this element of insurable interest would certainly result in your insurance claim will not be paid by the insurance company.

Tweet