1. Principles of Insurance

2. 1. Utmost Good Faith
The person seeking insurance must provide all relevant details and be truthful.
e.g. driver must inform company if they have penalty points as it increases the degree of risk

3. My house neighbours house 2. Insurable Interest
The insured must benefit financially from the items existence and suffer financially from its loss
My house
neighbours house

4. 3. Indemnity The insured cannot make a profit from insurance.
If underinsured, the average clause formula is used to calculate the fraction of compensation they are entitled to.
Amount insured x loss = compensation
Current market value

5. 4. Contribution
If the person is insured by two or more insurance companies and makes a claim, the compensation to be paid is split between them

6. 5. Subrogation
Once the insurance company pays the claim they take the legal rights and the insured cannot sue for damages
E.g. if the insured persons car is stolen and compensation is paid, if it is found it then belongs to the insurance company