Your Personal Financial Adviser

Most of us feel lost while understanding the concept about insurances. As a layman, we are not very well-versed in how the insurance field works. In simple terms, insurance can be defined as the contract between the policy holder and the company or the underwriter wherein which the company undertakes to pay the agreed upon insurance amount if the policyholder actually pays the reasonable amount of premium for an agreed upon period of time. Let us consider some of the fundamental principles in the insurance field.

1)    Insurable Interest: The owner of the property includes the financial interest in the deed of the insurance and this constitutes the insurable interest. A loss that might occur to him due to his financial stake in the property is the reason why a person goes onto insuring his property.

2)    Umberima fadei: This terms means good faith and it actually means that the two parties which are involved in an insurance contract must disclose accurately all the facts regarding the asset which is mentioned in the insurance contract and thus, the insured should reveal all the facts to the insurer regarding the risk that is being insured. Also, it is the duty of the underwriter to explain in detail the terms and conditions as well as the exceptions that constitute the insurance policy.

3)    Indemnity: This term in the insurance field states that the insurer needs to enjoy the same financial position as he possessed before the loss he has experienced now.

4)    Contribution: In certain insurances, there is more than one insurer who forms the risk and in such cases if a loss has occurred, then the insurers will contribute for the claim settlement with regards to their rateable proportion.

5)    Subrogation: In the topic of insurances, it must be comprehended that contribution and subrogation work together and make sure that the concept of indemnity is preserved. Mostly, subrogation comes into picture in the concept of motor insurances. For instance, in a scenario when there is an accident between two vehicles, there is the tortfeasor(s) who is held responsible for making the accident happen and in such cases, the policyholder who has nothing to do with the accident can recover their insurance amount from their underwriter of the person who was responsible for the accident.

Thus, understanding the concepts in insurance will help us in choosing a good policy which suits our needs and demands.

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