The Basic Principles of Insurance

Basically, everything that his name must have guidelines / basic principles, as well as the insurance industry. Still related to the previous article, the purpose of insurance, hopefully the following article which will further add to our knowledge about the world of insurance.

Basic Principles of Insurance

There are some basic principles that animate the insurance industry and guide the implementation of the activities of insurance :

1. Insurable Interest
Insure that the parties should have an interest in the property that can be insured (insurable). Where the object of interest and must be legal (not against the law) and decent. Having the benefit of the insured object if you suffer financial loss, if the accident occurred and caused loss or damage to the object.

In the event of a 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. Violations of this principle may result in a claim can not be paid.

2. Utmost Good Faith (Best Intentions)
Insured shall inform clearly and carefully about all the important facts relating to the object to be insured (material facts that would affect the Insurer in accepting or rejecting an application for insurance). While the Insurer is obliged to explain the risks are warranted or excluded, all terms and conditions of coverage are clearly and accurately. This obligation applies since the agreement concerning the insurance agreement is discussed through insurance contracts completed or in the event of changes to the insurance contract and the things that are related to those changes.

3. Indemnity (Indemnity Compensation)
Intent on this principle aims to restore the position of the insured in the position just before the loss of the guaranteed policy. If the insured object affected causing loss, the Insurer will indemnify be the same as immediately before the loss, to restore the financial position of the insured. Thus the insured is not entitled to obtain greater compensation (taking advantage) of Insurers for their losses.

Some way of payment of compensation applicable:
• Payment by cash, or
• Repair or replacement, or restoration of.

4. Subrogation
This principle is a consequence of the principle of Indemnity, namely the transfer of title (subrogation) of the Insured to the Insurer, if the Insurer has paid compensation to the insured.

5. Contribution
If an insured object to some insurance companies will apply the principle of contribution of each of the insurance company.
example:
Insured insuring the object of $ 200 million to three Insurers (insurance company):
Example: Insurance A $ 200 million, $ 100 million B, and C $ 100 million.
If the object is a total loss, then the maximum compensation that the insured obtain from each Person is:
A = $ 200 million / $ 400 million x $ 200 million = $ 100 million
B = $ 100 million / $ 400 million x $ 200 million = $ 50 million
C = $ 100 million / $ 400 million x $ 200 million = $ 50 million
Means the amount of compensation received from a third Person Insured (insurance company) is not $ 400 million, but $ 200 million (according to the actual price).

6. Proximate Cause (Proximal Causes)
The principle is used to find the cause of the loss is actively and efficiently. "Unbroken Chain of Events" is a series of events chain unbroken.
The purpose of this principle is that if the interest / object of the insured who is insured, the unfortunate, the first thing to be done by the Insurer is looking for causes of an active and efficient that drives a series of such events without interruption, so that in the end there is a disaster . 
 
Hopefully after understanding about the basic principles and purposes of insurance, will make a strong belief in ourselves that insurance is an important thing in our lives. May be useful.