Q.Explain the principles of insurance.

An insurance contract only works fairly, and stays financially sound for the insurer, if both sides follow a set of well-established rules of the game.

An insurance contract rests on the following well-established principles:

1. Utmost good faith (uberrimae fidei) — both parties, especially the insured, must disclose every material fact relevant to the risk honestly and completely, even if not specifically asked.
2. Insurable interest — the insured must have a genuine financial stake in the subject matter insured, such that they would actually suffer a loss if the insured event occurred.
3. Indemnity — the insured is placed, as nearly as a money payment can achieve it, in the same financial position as immediately before the loss, no better and no worse; life insurance is treated as an exception since a life cannot be given a precise value.
4. Contribution — if the same subject matter is insured with more than one insurer, each bears only its proportionate share of the loss, so the insured cannot recover more than the actual loss.
5. Subrogation — once an insurer pays a claim in full, it acquires the insured's rights to recover the loss from any responsible third party, preventing double compensation. …

List all six principles with a one-line explanation each, and close with why these principles c …

Do not merge indemnity and insurable interest into one idea — insurable interest is about having a stake at all, while indemni …