Basic Principles of Insurance

»Utmost Good Faith

It is meant, that you are obliged to inform clearly and carefully about all the important facts relating to the insured object.

This principle also applies to insurance companies, which describes the risks that are guaranteed as well as exempt, all terms and conditions of coverage are clearly and accurately.

This principle is very important because:
• In general the insured to know more fully the objects to be insured than the insurer.
• Calculation of the premium amount is influenced by the burden of risk.

»Insurable Interest

You said to have an insurable interest in the object if you suffer financial losses in case of disasters that cause harm or damage to the object. Financial interest allows you to insure your property or interests. In the event of disaster for the insured object and proved that you do not have a financial interest in the object, then you are not entitled to receive compensation.

»Indemnity

If the object is affected, causing insured losses the insurer will reimburse you to restore your financial position after the loss to be the same as immediately before the loss.

Thus, you are not entitled to damages greater than the loss you suffered.

Example: The market price of 100 million vehicles, insured for 100 million. When the disaster so that the vehicle is:
• Missing, and the market price of the vehicle at that time:
- 100 million, then you receive an indemnity of 100 million.
- 125 million, then you receive an indemnity of the insured value, ie 100 million.
- 75 million, then you receive compensation for the market price, which is 75 million.

• Damage caused by accident, then the cost of repairs, replacement of parts, labor cost of the workshop will be entirely the responsibility of the insurance company so that a maximum of 100 million.

Some ways of payment of compensation applicable:
• Payment by cash, or
• Repair, or
• Replacement, or
• Restore back.

»Subrogation

If you are experiencing losses due to negligence or fault of third parties, then the insurance company to compensate you, will replace you in a position to sue the third party.

»Contribution

You can only insure the same property on multiple insurance companies. But if there is loss of the insured object, it automatically applies the principle of contribution.

The principle contribution means, that if the insurer has paid the full compensation you deserve, then the insurance company the right to sue other companies involved in a liability (jointly cover your possessions insurance) to pay the losses of each a magnitude proportional to the amount of coverage that the closure.

Example:
You insure a single unit residential building at 100 million to three insurance companies:
Insurance A = 100 million.
Insurance B = 50 million.
Insurance C = 50 million.
Total = 200 million.

When the building burned to the ground (total loss) then the maximum compensation you get from:
Insurance A = (100 million / 200 million) x 100 million = 50 million.
Insurance B = (50 million / 200 million) x 100 million = 25 million.
Insurance C = (50 million / 200 million) x 100 million = 25 million
Total = 100 million.

Means the amount of compensation you receive from all three insurance companies are not 200 million but 100 million according to the actual home prices.

»Proximate Cause

If the interests of the insured suffered natural disasters or accidents, then first of all, insurers will look for the causes of the active and efficient to move an unbroken chain of events that ultimately there was the accident or incident.

A principle that is used to find the cause of the loss of active and efficient is: "Unbroken Chain of Events" is a series of chain of events that are not interrupted. For example, the case of personal accident claims the following:

• A person driving a vehicle on the highway at high speeds so the car out of control and overturned.
• Victims of severe injuries and was taken to the hospital.
• Not long after the victim died.

From these events in mind, that he was the victim Proximate cause driving at high speed so the car out of control and overturned. Through Proximate cause will be known whether the cause of the accident or the accident is covered under the insurance policy or not?