Understanding the Principles of Insurance

The seven Principles of insurance state the different groups that are insurable. They are classified both for the sake of organization, and so that insurance companies can decide which area of expertise they would like to specialize in as an organization.

The first of the Principles of insurance is dealing with a large amount of the same type of policy. This is commonly thought of in auto insurance. Over a hundred million drivers in the United States alone carry auto insurance, and they do so because the companies have discovered the way to balance the risk with the proper funds.

Five of the seven principles involve loss categories. Definite loss deals with loss that is a guarantee, such as life insurance. Accidental loss would be associated with renter’s or fire insurance. There is not a guarantee of theft or fire, so each individual case is evaluated before coverage is assigned. Large loss deals with coverages of items that are of great value to the buyer. Great care must be placed in these policies, as the amount of capital needed to replenish these losses may be great.

The fifth loss principle deals with limiting the amount of loss from a catastrophe, such as an act of God. Acts of God include floods, hurricanes, and many other meteorological events. The insurance company takes care to write into the policy that a total amount of capital can be distributed based on the number of policy holders affected. For instance, if a thousand people with the same coverage are hit by a tornado, the company can limit their risk through this principle.

The final principle is the affordable premium. A balance must be struck between the client and the company as to what is a sensible amount to pay for the term of the policy. This is crucial to the success of the company, and is assessed at the outlook of the policy.

These Principles of insurance are the foundation of a healthy insurance group. Using them is the key to offering smart insurance and making a sensible profit.


How The No-Fault Principle Vehicle Insurance Works

No-fault principle vehicle insurance refers to insurance contracts under which the insured is indemnified for loss by his or her company without establishing who was at fault first. The main aim of this insurance is to reduce the cost of premiums by eliminating the litigation process over the cause of the accident. By introducing an aspect of simplicity motorists can be assured of receiving quick payments for injuries.

As you will realize, this type of insurance does not promise the involved parties, absolute justice as would be the case if they were defendants and plaintiffs in a common law practice. It provides average justice for everyone in motor vehicle accidents. The speedy justice is advantageous especially if you consider the economical angle.

However, it should be noted that the no fault principle does not prevent the victims of vehicle accidents from seeking legal action in a bid to recover extra amounts from the defendant. The ability to sue is generally influenced by the province as well as other conditions. In order for such actions to be fruitful there are certain conditions regarding the case which must be fulfilled. Among other conditions, death, disfigurement and monetary thresholds are the main considerations. In some provinces, you can only sue for economic loss and not pain or suffering.

Although, it helps eliminate delays, when this principle was introduced in some parts of Canada such as Saskatchewan, it was not because of delays but the low percentage of vehicle owners who carried liability insurance covers at the time.

Before you go for this type of insurance cover, there are certain things you should have in mind. First, you should realize that the term no-fault does not mean that you will never be at fault when an accident occurs. Insurance companies have to find someone at-fault fully or partly whenever an accident occurs.

Another thing you should realize is that when you are found at-fault after the accident has occurred, it is added to your insurance record. The direct effect is increased policy costs as you are now considered a higher risk.

One good thing about no-fault principle vehicle insurance is that the rules are standard when it comes to assigning within a province hence all insurers have to abide by the set standards. The criteria however differ with different provinces. For instance a driver who rear-ends another car on an icy road in Ontario is at fault since Ontario fault determination rules require drivers to take road conditions into consideration.

Finally, the percentage of fault is used to determine the amount of deductible that you have to pay. It is also important to note that although not all provinces have no-fault principle vehicle insurance, all provinces have a degree of no-fault accident benefits coverage. This means compensation for the driver, passengers and pedestrians injured or killed in the accident. Such compensation covers rehabilitation and medical expenses, loss of income due to disability, funeral expenses and death. With this information in mind, you will not longer be confused by the principle behind this type of insurance.


Know the Basic Principles of Insurance!

Insurance contracts operate on the basis of five major principles. Every investor who plans to enter into a contract with an insurance company should know the basic principles so that the contract can remain valid even in the event of a loss occurring. A person can get captive insurance from a company which is usually established with the aim of insuring risks that arise from their current group. Many people lack this knowledge and find it hard fulfilling all the necessary requirements to start a contract. The basic principles are briefly discussed below.

They include:

Principle of insurable interest. This principle states that an indemnity claim is not valid unless the person can prove that he/she has directly suffered a loss as a result of the calamity occurring. For example a person can indemnify the life of his children because there is sufficient insurable interest in case the children die.

Principle of Indemnity. It states that the company will only pay the replacement value of the property in case the person suffers a loss as a result of any incident. However this principle does not apply to life insurance policy but applies to all the other property insurance.

Principle of utmost good faith. It is also known as the principle of uberrima fidei. It states that the person taking a policy is supposed to disclose all the required and relevant material facts concerning the property or life to be indemnified with all honesty. Failure of disclosure of all relevant material facts will lead to the contract being null and void hence no compensation. One should be keen to ensure he/she does not over or under insure his/her property.

Principle of subrogation. In this principle, whatever of the property indemnified after the insured has been compensated becomes the property of the indemnifier. Take an example of a person who has indemnified his/her car against the risk of an accident. In the event that an accident occurs and the insured is compensated by being given a new car, then the damaged car becomes the property of the insurer.

Principle of proximate cause. This principle states that for the insured to be compensated, there must be a very close relationship between the loss suffered and the risk insured. It means that the loss must arise directly from the risk insured.

Before you decide to enter into a contract with a company, it is important to be aware and know all the basic principles of insurance. If you fulfill all the principles listed above, then your compensation is guaranteed.