Principles of Insurance

Principles Explanations Examples

 This applies to all contract of insurance
 We may only insure those things which we have
Insurable interest insurable interest
 This applies to all contract of insurance
 The insured must disclose fully all material facts
known in answering all question in the proposal
Utmost good faith form
 Failure to disclose the whole truth will make the
policy void/invalid
 This applies to all contract of insurance
 Except life assurance and personal accident
insurance
Indemnity  To indemnify means to restore a person to the
position that he was that he was in immediately
before the event
 This applies to all contract of insurance
Except life assurance
Contribution[First
corollary of
indemnity]
 Subrogation means transfer of rights and
remedies of the insured to the insurer after
indemnity has been effected
Subrogation  This means that when the insurance company has
[Second corollary paid out the claims, it subrogates or steps in to
of indemnity] the place of the insured and inherits all his rights
and remedies against third parties
 This applies to all contract of insurance
 The root cause of the event is known as
proximate cause
Doctrine of
proximate cause
I can insure my own property, house,
life, even my spouse’s life
I cannot insure my neighbor’s house
and property since I have no
insurable interest
When I apply to insure my premises
against fire, it is my duty to inform
the insurance company if my
premises contain goods which are
inflammable
Mr. X insured his stock against fire
for $3000.one third of it was
destroyed. Even if the replacement
value of the stock destroyed was
$1100,Mr X would only receive
$1000
[⅓ of $3000]
Mr. A insures his goods worth $1000
against fire for $1000,each with 3
insurance companies. In the event of
fire Mr. A would receive maximum
of $1000.
He cannot receive $1000 from each
insurance companies
Mr. A’s car was wrecked in an
accident. He agreed to accept $4000
in settlement as indemnity’s car is
then sold to a junk yard for $50. Mr.
A loses all rights to this amount
because te insurance company, after
paying him, is now the owner of the
wreck. the $50 goes to the insurance
company
Mr. B may take a personal accident
policy. One day while driving he had
an accident. Because of the shock,
he died of heart attack The insurance
company may not pay because the
root cause oh his death was not due
to the accident –but heart attack
Type of Advantages Disadvantages
medium
News paper It is read by many people It has a short life of span
It is one of the cheapest media The written advertising message
It is suitable for products or service in can reach only the literate
general demand ie, film, electrical The paper quality is low
appliances The advertisements have to
It enables the advertiser to present the compete with other advertisements
product in some detail. E.g. technical for the readers attention
details about the car
The advertiser can have the choice of the
national or regional coverage
News paper have the capacity to accept a
large number of advertisements
Magazine The paper quality is better than news Limited readership
paper Magazine is published only
Enjoy longer life span than that in the periodically
news paper Less Advertisement space
it is suitable for advertising message
which are long and have to be read in a
leisure manner
Radio The advertising message can reach large No visual effect
number of people produce cheaply No copy of material
Audio effect is possible May not capture the audience
Illiterate also can understand attention
Radio sets are portable Its life span is very short
Television With realistic sound, colour and Detailed explanation is not possible
movement high cost
Can reach a large number of viewers Life span is short
Can be directed at national or regional
viewers
High audience attention and personal
impact
The use of the product can be
demonstrated and explained

internet It is an interactive medium Coverage is limited only to those

Can use multimedia to create realistic who surf the internet
effect Possible technical problems of
The advertisements can place in a popular connection, viewing, and
web site maintaining
Long Life span
Very low cost
Can be monitored
Poster National campaign possible Limited amount
Most group covered Difficult to measure effectiveness
Encourage impulse buying Weather can ruin posters
Bonded warehouse
It is located near port of entry
Controlled and supervised by the customs and
Excise Authorities
To store dutiable goods, before payment of
duty
Dutiable goods cannot be removed until duty
is paid
store the goods that re-exported or imported
Cargo liners
Regular itinerary
Carries variety of cargo
Freght brate for goods and passengers are fixed by
their owners
Not subject to charter
More control and supervision
FACTOR
He sells goods on behalf of the principal
He has possesion of the goods
He can deal with the goods as if he is the
owner, selling and buying in his own name
He gets commission
He can make a profit from the sale of the
goods
Ordinary warehouse
There is no specific location for the ware house
Controlled and supervised by the owners with the
help of his workers
Used to store general goods
There is free movement of goods
Store the goods that are locally produced, exported
or imported
Tramp
No special itinerary
Carries only one type of goods
Fright rates are fixed by bargaining
Can be chartered
BROKER
He sells and buys goods on behalf of the principal
He does not have possesion of the goods
He cannot buy or sell in his own name, but merely
brings buyers and selers
His commision is called remuneration
He does not have share in the profit