Professional Documents
Culture Documents
Example: If the house you own is damaged by fire, the value of your
house has been reduced by the damages sustained in the fire. Whether you
pay to have the house rebuilt or you and up selling it at a reduced price.
You have to suffered a financial loss resulting from the fire. By contrast, if
your neighbors house, which you do not own, is damaged by fire, you may
feel sympathy for your neighbor and you may even be emotionally upset,
but you have not suffered a financial loss from the fire, but in this example
you do not have an insurable interest in your neighbors house.
2. Uberrima fides Almost good faith
The insurance contract must be based on good faith. If the insurance
contract is obtained by way of fraud or misrepresentation it is void. When
an individual apply for life insurance, it is important to answer all questions
truthfully and to volunteer any information even if not asked, if in doubt,
just disclose it. Failure to disclose material facts could render the entire
contract void.
Example: If a person was suffering from sinusitis but did not disclose it, the
entire contract could be cancelled when the insurer discover non-
disclosure. Some financial advisors who in their enthusiasm in closing the
sale advice their clients not to disclose their pre-existing conditions for
fear that the underwriter would reject the case. Therefore it is important
to engage an ethical financial advisor. To avoid any conflict of interest,
ensure you pay a fee for consultation.
3. Material facts disclosure
In the insurance contract, the proposer is required to disclosure to the
insurer all the material facts in respect of the proposed insurance. This
duty of disclosing the material facts not only applies to the material
facts which are known to him but also extends to material facts which
he is supposed to know.
Examples
Acquisition of new companies and/or mergers
Changes to your business description.
Additional product lines and/or new services
Hazardous trade processes, or storage of hazardous matter, including
changes or additions to processes or storage already declared
Incidents not reported to insurers that might otherwise have led to a
claim e.g theft or small fires.
4. Indemnity
The insurance contract should always be a contract of
indemnity only and nothing more.
Insured cant make any profit from the insurance contract.
Insurance contract means for coverage of losses only.
Indemnity means a guarantee to put the insured in the position
as he was before accident.
This principle does not apply to life insurance contracts.
The main object of this principle is to ensure that the insured is
not able to use this contract for speculation or gambling.
5. Contribution
In case the insured took more than one insurance policy for same
subject matter, he/she cant make profit by making claim for same
loss more than once.