CHARACTERISTICS OF AN INSURANCE CONTRACT - 2

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LEGAL REQUIREMENTS 

When a company insures another company there are some basic requirements and Regulations. Some of the common principles of Insurance contract Include the following :

1. INDEMNITY : The Insurance company indemnifies the insured in the case of certain losses but only upto the insured interest. 
2. INSURABLE INTEREST : The person who is insured must directly suffer from the loss. The insurable Interest must exist irrespective of the fact that the insurance is taken on a property or on the life of a person.
3. GOOD FAITH : The Insurance company and the insured are bound by a GOOD FAITH bond of honesty and the insured must share all the details which are material to  the contract of Insurance. 
4. CONTRIBUTION : All the entities which are insured contribute some amount of money as per the contract which is called as premium and this premium helps the Insurance company to pay the entity which has actually suffered the loss. 
5. SUBROGATION : The insurance company acquires legal rights to recover on behalf of the Insured. For instance the Insurer may sue the person who the reason the Insured had to suffer the loss and Collect the Damages. This right however can be waived by the insurance Company.
6. PROXIMATE CAUSE : The cause of loss must be covered by the contract of Insurance and the dormant causes must not be excluded. If the cause of the loss is not covered by the Policy then the Insurance company will not indemnify the Insured.
7. MITIGATION : In the case of occurance of the loss the Insured must make all the possible attempts to mitigate the loss. Take all the precautionary measures that he would've taken had he not entered into the contract of the Insurance with the Insurance Company.