applies to contracts. It requires both the parties to be legally capable of entering a contract. Your contract is based on ‘legal purpose’, which means that the contact is not meant for encouraging illegal activities. The other legal principles that govern the contracts are:

Principle of Indemnity:

This principle requires the insurer to pay an amount, not more than the actual loss suffered, in case of loss. The amount paid as claim by the company should not be more than the sum assured in the contract. The aim is to provide a claim amount that will help the claimant to regain the lost financial position. In some indemnity contracts, the amount payable by the company is subject to the amount of actual loss. Some indemnity contracts also have a provision for the claim to be paid only if the actual loss exceeds a certain amount. For example, in an auto contract of 3000 dollars, you would be eligible for the claim amount only if your actual loss exceeds 3000 dollars. In case, the actual loss amount is below 3000 dollars, you would be liable to bear all the costs.

Insurable Interest

In this cover, the contract covers only those properties or events specified at the time of investment. For example, if you live in your uncle’s house and apply for a homeowners’ insurance, the company will reject the claim, since you are not the owner of the property and do not suffer any personal financial loss in case the house gets damaged.

Principle of Subrogation

The principle of subrogation enables the insured to claim the amount from the third party responsible for the loss. It allows the insurer to pursue legal methods to recover the amount of loss, which the company has paid the insured via the claim. For example, if you get injured in a road accident, due to reckless driving of a third party, the company will compensate your loss and will also sue the third party to recover the money paid as claim.

Doctrine of utmost good faith

This means that both the parties are expected to disclose any information, important to the contract. For example, when applying for life insurance, it is your duty to disclose any permanent ailments that you might have. Likewise, your insurer also is expected to be clear on the illnesses that are not covered under the contract.

Once you become familiar with the principles, you will be able to understand the scope of your contract. This makes you independent of the advisor.

Article Source: Articles Beyond Better

Joe Kenny writes for the UK Personal Loan Store and offer more information on UK debt consolidation loans and other loan topics available on site. Visit Today: www.ukpersonalloanstore.co.uk

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