A motor insurance plan is there to provide the insured financial security and protection from any future uncertainties. Knowing these six principles in motor insurance should help you to understand your car insurance contract in that regard.
The principle of Utmost Good faith
The person being insured and the insurer have an obligation to each other. When you take out a policy, you’ve an obligation to be truthful with your agent about the value of what you’re insuring and the risks of losing or damaging it. Your agent then has an obligation to tell you any restrictions or rules that might reduce the value of your coverage.
The Principle of Indemnity
Insured must never ever try to misuse their safe financial cover. The insured is placed after loss, as far as possible, in the same position as they were immediately before the loss. By seeking profit opportunities or reporting false occurrences violates the terms and conditions of an insurance contract. This breaks trust, results in breaching of a contract and invites legal penalties.
Principle of Insurable Interest
It’s a duty of the insurer to accept and approve all genuine insurance claims made, as early as possible without any further delays and annoying hindrances. And as long as the person who’s getting insured has ownership of what’s to be insured, such as their vehicle.
Principle of Proximate Cause
Sometimes your car insurance protects against some perils and types of damage but not others. Let’s say your car is caught in a flood, for instance, and your car insurance protects against wind damage but not flooding. If the proximate or primary cause of damage was floodwater, your insurer will refuse to pay. If you prove the proximate cause of the damage was the wind, you can collect.
The Principle of Subrogation
Is the transfer of rights from the insured to the insurer when the loss or damage to the vehicle is caused by the negligence of another person. Insurers exercise the right to cover the loss from the person responsible. Under common law subrogation operates only after the claim is paid and gives the insurer a way to recoup its losses.
The Principle of Contribution
Arises when there’s double insurance, that’s, when the same vehicle is insured under two policies. According to policy condition the loss is shared pro-rata between the two insurers.