Q.Explain the six fundamental principles of insurance. State which of them do not apply to life insurance.

Every valid insurance contract rests on a set of governing principles, but not all of them apply to life insurance, because life cover is not based on indemnity.

Explain each principle briefly, then identify the three tied to indemnity that life insurance does not follow.

The six fundamental principles of insurance are:

1. Utmost Good Faith (Uberrimae Fidei) — both parties, especially the insured, must disclose every material fact relevant to the risk honestly and completely, even without being asked; breach makes the policy voidable at the insurer's option.
2. Insurable Interest — the insured must have a genuine, legally recognised financial interest in the subject matter, such that its loss causes real financial harm; this is what makes insurance a valid contract rather than a wager.
3. Indemnity — the insured is compensated only to the extent of the actual loss, never more, so insurance is not a source of profit.
4. Subrogation — after fully indemnifying the insured, the insurer steps into the insured's place to recover the same loss from any third party responsible for it.
5. Contribution — where the same risk is insured with several insurers, each contributes to a loss in proportion to the sum it has insured, so the insured recovers the actual loss only once.
6. Proximate Cause (Causa Proxima) — where a loss results from a chain of causes, liability is decided by the nearest, dominant cause; a claim is payable if that cause is a covered peril.

Application to life insurance. Utmost good faith and insurable interest apply to every contract of insurance, and proximate cause applies to both life and general insurance. But indemnity, subrogation and contribution do NOT apply to life insurance, because all three exist to limit recovery to the actual measurable loss, and a human life has no market value at which a claim could be capped — life insurance pays the full sum assured and is a contract of assurance rather than indemnity.