INTRODUCTION
According to the Black Law’s dictionary, Insurance is defined as ‘A contract by which one party (the insurer) undertakes to indemnify another party (the insured) against risk of loss, damage, or liability arising from the occurrence of some specified contingency, and usually to defend the insured or to pay for a defense regardless of whether the insured is ultimately found liable. An insured party usually pays a premium to the insurer in exchange for the insurer's assumption of the insured's risk.’[1] The following are various principles of an insurance contract.
MAIN BODY
Utmost good faith: An insurance contract is based on the principle of utmost good faith. Under this insurance contract both the parties should have faith over each other. They must behave or act in utmost good faith. As a client, it is the duty of the insured person to disclose all the facts to the insurance company. Any fraud or misrepresentation of facts can result in cancellation of the contract. [2]
Principle of indemnity: The principle of indemnity states that the insurer agrees to pay no more than the actual amount of loss. Indemnity is the security or compensation against loss or damage. The principle of indemnity is such principle of insurance stating that an insured may not be compensated by the insurance company in an amount exceeding the insured’s economic loss.
Doctrine of subrogation: This principle of subrogation strongly supports the principle of indemnity. Subrogation means substitution of the insurer in place of the insured for the purpose of claiming from the third person for a loss covered by insurance. For example, in the case of an auto accident, subrogation stops an insured from collecting payment from two insurance companies for the same loss, places responsibility for the accident on the third party and gives an insurance company the legal right to demand recovery.
Warrant in insurance contract: Certain conditions and promises imposed in the contract are called warranties. A warranty is that by which the insured undertakes that some particular thing shall or shall not be done. Warranty is a very important condition in an insurance contract which is to be fulfilled by the insurance company.
