Insurance Explained-Definition of Insurance- Difference Between life and general insurance 

We will be covering following 3 topics

What is the meaning of insurance

Types of insurance

Principles of insurance

What is the meaning of insurance

An arrangement by which a company or the state undertakes to provide a guarantee of compensation for speech weight loss damage illness or death in return for payment of a specified premium.

Types of insurance

There are two types of insurance

1. Life insurance

2. General insurance or Non-life insurance

Principles of insurance

1. Principle of Utmost Good Faith

According to this principle the insurance contract must be signed by both parties that is insurer and insured in an absolute good faith or belief or trust they should not hide anything from each other.

Insurance Explained-Definition of Insurance- Difference Between life and general insurance 

2. Principle of Insurable Interest

The principle of insurable interest states that the person getting insured must have insurable interest in the object of insurance. That means you cannot get the insurance policy for the neighbor's car or for the neighbor's kid you shall have the insurable interest in the in the property or the person where you are invested taking the insurance plan.

3. Principle of Indemnity

According to the principle of indemnity an insurance contract is signed only for getting protection against unpredicted financial losses arising due to future uncertainties. That means that the role of the insurer is to provide the good to the loss happened.

4. Principle of Contribution

It applies to all contracts of indemnity if the insured has taken out more than one policy on the same subject matter.

According to this principle the insured can claim the compensation only to the extent of actual loss either from all insurer or from any one insurer.

If one insurer pays full compensation then that insurer can claim protection proportionate claim from other insurers. So if your car has 100,000 rupees of principle indemnity then you can take maximum up to that amount.

5. Principle of Subrogation

According to the principle of subrogation when the insured is compensated for the losses due to damage to thee to his insured property then the ownership rights of such property shifts you to the insurer.

6. Principle of Loss Minimization

According to the principle of loss minimization insured must always try his best to minimize the loss of his insured property in case of certain events like a fire breakout or blast, etc. You shall call the insured person shall call the police or the fire brigade and he should put all his efforts to minimize the loss to the product or the property.

7. Principle is principle of Cosa proxima ( nearest cause )

Proximate cause is concerned with how the actual prints loss or damage happened to insured party and whether it is a result of an insured peril.

It looks for what is the reason behind the loss is that he is an insured peril or not.

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