The Rules of Insurance

Principles of insurance Insurable Interest Utmost Good Faith Indemnity Contribution Subrogation

Insurable Interest In order to insure something you must benefit from its existence & suffer from its loss. Eg. You can insure your own house but you cannot insure your neighbours’s house.

Utmost Good Faith You must tell all relevant information when filling out an application for insurance. Eg. If you have an illness you must tell the ins. co. as they may want to charge a higher premium or not insure you at all.

Indemnity You cannot make a profit from insurance. There is no point in insuring your house for more than it is worth as the ins. co. will only compensate you for the actual value of the house.

Contribution If a risk is insured with two insurance companies each will pay half of the compensation. Eg: A ring insured with two ins. co.’s. for €1,000 Both will give ?? €500 each.

Subrogation Passes the legal right of the insured over to the insurer to claim from a third party who caused the loss. Eg. Whirlpool oven causes house to go on fire. Ins. co. pays compensation to insured and then seeks their own compensation from whirlpool.