The principal of insurable interest The principal states

The principal of insurable interest The principal states that the insured person must have a personal interest in the item being insured. That is, they must gain by its existence and suffer from its loss.

The principal pf indemnity • This principal states the person must not make a profit from insurance. • In the event of a loss they will be covered to the value of that loss but will not receive any extra money.

The principal of utmost good faith • The principal states that a person must honestly provide important information about themselves and the item being insured when applying for insurance.

• These pieces of information are called material facts. Failure to give this information may result in nonpayment from the insurance company if a loss occurs.

The principal of subrogation • This principle states that the insurance company can seek to recover the amount paid to an insured person in the event of a loss. It has the right to do this in two ways: • It can sell any damaged items involved in the loss • It can sue any third party in causing the loss

The Principle of Contribution • This principle states that if a person has insured an item with more than one insurance company, they cannot claim the full amount of the loss of that item from all of the companies. Each of the insurance companies will pay part of the loss. • This is tied to the principle pf indemnity, as it guarantees that the insured person will not make a profit from their loss.

• Marie Clarke has a house valued at € 350, 000. It is insured with two insurance companies. If a loss of € 40, 000 occurs, the insurance companies will each pay € 20, 000. Marie will not receive € 40, 000 from each company. • Patrick Malone did not admit that he is a smoker when he applied for health insurance. He later gets heart disease and needs hospital care. The insurance company will not pay as he was not truthful. • David Walsh can take out insurance on his own house as he would suffer if it was damaged. He cannot, however, take out insurance on his neighbour’s house as any damage to it would not cause him a loss. • A car reverses over Sarah Jone’s bicycle and the insurance company pays her for the loss. The insurance company than has the right to sell the bicycle for scrap and sue the driver of the car. • Nina Mulholland insured her new watch for € 200. If the watch is lost or stolen, the insurance company will pay her € 200 and no more

Loadings • When calculating premiums, there is an increase in the price for each risk factor. • This is added to the basic premium due to risk and is called a loading

Discounts • Insurance companies offer special discounts when risks are lowered.

Discounts Loadings