There should be a valid contract to make fire insurance
valid. A valid fire insurance contract is based mainly on the following
principles:
1.
Principles
of utmost good faith: insurance is based on utmost good faith I.e.,
disclosure of all essential things exactly by both parties in insurance deal.
The law compels the parties to the contract to make full disclosure of all
material facts. The material facts are the information which may affect the
decision of parties to enter or not to enter into an agreement. The insurer
calculates the risk of the insurance and fixes the price. The insurer knows the
nature of risk he is transferring. Full or partial concealment of the any one of
the parties makes the contract void.
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2.
Principle
of insurable interest: insurable interest is a necessity for a valid
insurance contract. Insurable interest means the interest of such a nature that
the event insured against might cause of the subject matter of insurance, he
has no interest. If you are out of the owner ship of the house, your interest
in the loss is zero.
Capacity of person means more than what is
found in the contract. In insurance he must have also an interest in the
insurance properly.
3.
Principle
of indemnity: indemnity means security against loss or damage or
compensation for loss. It is equal to an exact financial compensation. The loss must be estimated in money value.
The compensation will be equal but never more than the value of loss to give
the margin of profit. The insured is restored with property loss or this is
reinstated in his position before loss. In case of fire and marine insurance,
amount of loss plus a certain amount of profit that the insured might have
earned if there was no loss is taken an amount of compensation.
4.
Principle
of subrogation: the principle of insurance or applicable in fire and other
property insurance. subrogayion is a combination of two latin words : sub and
roagare meaning under and asking respectively. This means
stepping into the shoes of other. By this principle, one party to contract gets
the power to exercise all the rights of another party against a third party.
5.
Principle
of proximate cause: this principle looks at the origin of loss.
Compensation is payable only when the loss takes place by the insured peril.
Sometimes insured peril comes along with several uninsured perils. Some perils
before and some perils come after the insured perils. There is a series of
event attached to the perils causing the loss. In such complicated situation
previous legal decisions guide the insurers’ action. We mention a few points
taken from such decision. Firs what is proximate cause? It is :
The active efficient cause
The active cause set in mention a chain of other events
Then the events cause the loss
In
the chain there is no intervention of any other outside force
Every event is the
result of a cause. The criteria to pick up the direct cause of loss are to find
out the domination, effective and proximate cause. But losses which are un-direct
or consequential may be covered by special agreement with insurance company.
2 comments:
Nicely said. Valid fire insurance contract is based mainly on these principles. Totally agree! Ourselves are covered up by a fire insurance policy from Malayan in the Philippines.
Principles of fire insurance are similar to principles of insurance. Fire Insurance relieves the insured from the horror of the fire losses to which he is exposed. Principles of Insurance are used in a different way in case of fire insurance.
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