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Five Basic Principles of Insurance

INSURANCE-PEDIA.COM | Insurance principles are the basis or basis of any problems arising in insurance contracts. According Soemitra (2010: 262), there are five principles of insurance as follows:

1. Insurable Risk
Insurable interest is the interest of the participant / insured with the insured object / party insured. If the insured suffers a loss or disaster on the object / party insured then the insured has no interest, then the insured is not entitled to compensation (compensation).

2. Goodwill (utmost good faith)
The parties who entered into an insurance contract, both the insurer and the insured must be well-meaning manifested by honesty and expressing keterburukan. Where the insurer must provide all the information about the coverage and the insured provide information on the object of coverage either requested or not. If the principle of utmost good faith is violated primarily by the insured, then the coverage becomes void.

3. Indemnity

This principle is a mechanism of compensation / compensation in case of disaster that is guaranteed, ie the insurer will restore the insured financial position in the original state as before the event of a disaster. Indemnification can be made by cash payment, reimbursement, repair or rebuilding.

4. For active (proximate cause)
Proximate cause is an active, efficient cause resulting in the occurrence of a chain event without the intervention of another force, beginning and working actively from a new and independent source.

5. Transfer of rights (subrogation)
The transfer of rights is when the insurer has provided compensation to the insured, whereas in the event that the loss resulted is innocent, the right to sue to the responsible / guilty party (third party) to the insurer.