Definition
The principles of insurance are foundational concepts that govern the operation and regulation of insurance contracts, ensuring fairness and financial protection against risks.
Summary
The principles of insurance are essential for understanding how insurance works and the responsibilities of both insurers and policyholders. Key concepts such as risk pooling, indemnity, and utmost good faith form the foundation of insurance practices, ensuring that individuals are protected against financial losses while maintaining fairness in the system. By grasping these principles, learners can better navigate the complexities of insurance policies and make informed decisions. Understanding these principles also helps individuals appreciate the importance of insurance in everyday life, from protecting homes and vehicles to ensuring health coverage. As learners progress through the topic, they will gain insights into various types of insurance, the claims process, and the significance of transparency and honesty in insurance contracts.
Key Takeaways
Risk Pooling
Insurance works by pooling risks from many individuals to protect against financial loss.
highIndemnity Principle
The indemnity principle ensures that an insured person is compensated for their loss but does not profit from it.
highUtmost Good Faith
Both parties in an insurance contract must act honestly and disclose all relevant information.
mediumSubrogation
Subrogation allows insurers to recover costs from third parties responsible for a loss after compensating the insured.
medium