7 Basic Principles of Insurance Explained in Simple Words
7 Principles of Insurance Why These Principles Even Matter Insurance is not just paperwork and policy numbers — it’s a deal built on trust. For that deal to work properly, there are some basic rules that both sides (you and the insurance company) have to follow. These rules are called the principles of insurance, and every valid policy is based on them. Let us go through them one by one, without the boring jargon. 1. Utmost Good Faith – Be Honest, Fully Both sides need to be truthful. If you are buying insurance, you must share all the important info (like health issues, past claims, smoking habits, etc.). In addition, the insurance company must tell you clearly, what is covered and what is not. If either side hides something, the deal breaks. 2. Insurable Interest – You Can’t Insure Just Anything You can only insure something if its loss hurts you financially. Examples: ✔ Your own car → yes ❌ Neighbour’s car → no ✔ Your spouse’s life → yes ❌ A random ...