Principles of insurance include;
Principles of indemnity
This principle state that insured can only be compensated for the actual loss suffered. The aim of the insurance company is to compensate the loss suffers for what they have actually lost financially being returned to the same financial position but no to benefit them.
Principle of utmost good faith or "ubernima fides"
At the time of signing the insurance contract the proposer is expected to give all the relevant material faults relating to the[property he wants to insure.
Principle of insurance interest
It states that, the insured should only insure property or life whose loss will affect him financially hence one cannot insure a friend‘s property.
Principle of proximate cause
For the insured to be compensated, there must be very close relationship between the loss suffered and the rick insured.
Principle of subrogation
After the insured has been compensate, the remnant of the insured item becomes the property of the insurer. This ensures that the insured person does not make against (profit) out of insurance.
Principle of contribution
This principle state that where a person has insured the same property with more than one insurance company. Upon the occurrence of the event of loss, all the insurance company will share the loss proportionately.