Principles of Fire Insurance

Principles of Fire Insurance
The fire insurance management is based mainly on the following principles:

1. The principle of Utmost good faith
2. The principle of Insurable Interest
3. Principle of Indemnity
4. Principle of Subrogation

1. The principle of Utmost good faith: Insurance is based on utmost good faith that is disclosure of all essential things exactly by both parties in insurance deal . the material facts are the information which may affect the decision of parties to enter or not to enter into an agreement. The insurer calculates the risk of the insurance and fixes the price.
Full or partial concealment of that by any one of the parties makes the contract void.

2) The principle of Insurable Interest: insurable interest is a necessity for a valid insurance contract. insurable interest means the interest of such a nature that the event insured against might cause loss to the insured. if you are out of the ownership of the house, your interest in the loss is zero.

3)principle of indemnity ; indemnity means security against loss or damage or compensation for the loss. it is equal to an exact financial compensation  .in case of fire and marine insurance amount of loss plus a certain amount of profit that the insured might have earned, if there was no loss, is taken as the amount of compensation.
rance he must have also an interest in the insurance property.

4. The principle of Subrogation: The principles of insurance is applicable to fire and other property insurance. Subrogation is a combination of two latin words; sub and rogare meaning under and asking respectively. this means stepping into the shoes of other . by these principles one party to a contract against a third party.
A capacity of a person means more than what is found in the Indian contract act, the age of interest above 18, and under Nepalese
contract act, 21 years, sane (not mad) may enter into the agreement. But in
insurance, he must have also an interest in the insurance property.
 It is equal to exact financial compensation. The loss must be estimated in money value. The
compensation will be equal but never more than the value of the loss to give
the margin of profit. This insured is restored with property the loss or this is
reinstated in his insurance, amount of loss plus a certain amount of profit that the insured
might have earned, if there was no loss, is taken as the amount of Subrogation:

This is very clear if we look into a fire insurance contract. a suffer a loss of Rs 60,000 by fire (the insurer) indemnified A up to Rs 10.000.A  has another alternative to seeking compensation. He may claim damage from the person from whose negligence the fire had occurred. If a prefers to take compensation from an insurer, he cannot ask the third party for compensation.

5)A principle of P Proximate Cause: This principle looks at the origin of loss.
Compensation is payable only when the loss takes place by the insured
peril. Sometimes insured peril comes along with several uninsured perils
Some perils. before and some perils come after the insured perils There
is a series of events attached to the perils causing the loss. In such
complicated situation, previous legal decisions guide the ins
We mention a few points taken from such decisions. First whats
proximate cause? it is

 *the active efficient cause
*the active cause set in motion a chain of other events
*then the events cause the loss.
*in the chain there is no intervention of any other outside force.

every event is the results of a cause. the criteria to pick up the direct causes of loss are to find out the dominant, effective and proximate cause.

an insurance company cannot sue in its own name. It is a settled principle of
law. It has also been incorporated in all policies. The insurance
upon payment of the loss to the insured is entitled to this insured's legal
equitable., and contractual right against third parties. This is called the
principle of subrogation.

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