Principles of Insurance

All insurance is based on the following five basic rules or principles:

  • Insurable Interest
  • Utmost Good Faith
  • Indemnity
  • Subrogation
  • Contribution

Insurable Interest

To insure something you must benefit from its existance and should suffer financialy from its loss.

Utmost Good Faith

You must answer all questions truthfully and reveal all relevant information when completing the proposal form or claim form.


The insured person should not profit from insurance. Insurance exists to put the insured person back in the same financial position they were in before the loss, not a better one.


Once an insurance company has payed any compensation for any insured item, the right of ownership of that item passes on to the insurance comapany.


Where the same risk is insured with more than one insurer, they will divide the cost of the claim between them.