The main Principles Underpinning All Insurance Contracts

Principles of Insurance Contracts

Central to every insurance contract is the Principle of Insurable Interest. This means the person getting insured must have a financial or other types of interest in the item being insured.
The Principle of Utmost Good Faith requires that both parties, insurer and insured, should act in good faith towards each other. The insured should disclose all material facts that can influence the decision of the insurer.
Indemnity is a key principle that ensures the insured is only compensated up to the actual loss incurred. It prevents the insured from making a profit from an insurance claim.
The Principle of Contribution comes into play when the insured has more than one insurance policy covering the same risk. It aims to prevent over-insurance and the moral hazard that might stem from it.

Policy Terms and Conditions

The Policy Excess is the amount which the insured will have to pay towards a claim. It can be compulsory (set by the insurer) or voluntary (chosen by the insured to reduce premium costs).
Exclusions are conditions or circumstances for which an insurance policy will not provide coverage. These should be clearly stated in the policy document.
Warranties are specific conditions in the policy which the insured must follow. Failure to comply can lead to the claim being declined.
Endorsements are changes made to the original insurance contract, via a written document, which modifies the terms of the policy.

Claims Processing

Notification is the first step in the claim process, where the insured notifies the insurer about the loss.
The Adjustment Process involves the insurer assessing the claim to determine its validity and calculate the amount to be paid.
Settlement is the final step in which the insurer pays out the calculated amount to the insured or to a third party on behalf of the insured.

Remember, insurance contracts are often complex and it’s important to understand the terminology and principles involved, especially in relation to real-world applications and scenarios.