Podcast
Questions and Answers
What duty does the insured have after being indemnified?
What duty does the insured have after being indemnified?
- Ensure the insurer does not make any claims.
- Negotiate directly with the third party.
- Maintain the property without reporting damage.
- Assist the insurer in subrogation. (correct)
Which type of insurance policy does NOT apply the principle of subrogation?
Which type of insurance policy does NOT apply the principle of subrogation?
- Life insurance (correct)
- Homeowners insurance
- Fire insurance
- Auto insurance
What is an example of a direct loss?
What is an example of a direct loss?
- Value of a lost item due to theft. (correct)
- Loss of income while a business is closed.
- Rental costs after a house fire.
- Legal fees incurred during a lawsuit.
What is a consequence of a direct loss in the context of fire damage?
What is a consequence of a direct loss in the context of fire damage?
Which of the following is covered under a standard Fire policy?
Which of the following is covered under a standard Fire policy?
Why is fire insurance considered important for property owners?
Why is fire insurance considered important for property owners?
Which of the following is NOT typically covered by fire insurance?
Which of the following is NOT typically covered by fire insurance?
What is essential for property owners to ensure before purchasing fire insurance?
What is essential for property owners to ensure before purchasing fire insurance?
What does the principle of indemnity ensure for the insured?
What does the principle of indemnity ensure for the insured?
Under the principle of contribution, what determines how much an insurer must pay when multiple policies are taken out?
Under the principle of contribution, what determines how much an insurer must pay when multiple policies are taken out?
Which statement correctly describes subrogation?
Which statement correctly describes subrogation?
What is a key limitation imposed by the principle of indemnity in general insurance?
What is a key limitation imposed by the principle of indemnity in general insurance?
What happens if an insured has multiple indemnity policies for the same loss?
What happens if an insured has multiple indemnity policies for the same loss?
What does the principle of indemnity imply about claims related to improvements on property?
What does the principle of indemnity imply about claims related to improvements on property?
When can an insurer invoke the right of subrogation?
When can an insurer invoke the right of subrogation?
What ensures that an insured person is not unjustly enriched by multiple policies?
What ensures that an insured person is not unjustly enriched by multiple policies?
Study Notes
General Insurance Principles
- General insurance operates on the principle of indemnity, ensuring the insured is compensated without profit after a loss.
- Compensation reflects actual loss instead of full replacement; e.g., partial fire damage does not entitle the owner to rebuild entirely.
- Indemnity prevents unjust enrichment of the insured and ensures fair compensation.
Subsidiary Principles
Contribution
- Insured individuals may have multiple policies for the same risk but can only claim up to their actual loss.
- If multiple policies are in effect, insurers share the loss proportionally.
- This principle prevents insured parties from profiting by claiming from multiple insurers for the same loss.
Subrogation
- Allows insurers who have compensated claims to pursue third parties responsible for the loss.
- Insurers can only exercise subrogation after indemnifying the insured.
- The insured must cooperate and not undermine the insurer’s recovery rights.
- Subrogation is not applicable in non-indemnity policies like life insurance.
Property Risk Exposures
- Properties are subject to risks of destruction or damage, which may influence an owner's financial stability.
- General insurance serves as a mechanism for loss transfer, offering protection against incurred losses.
Types of Loss
- Direct Loss: Financial impact from physical damage, destruction, or theft (e.g., a house burned in a fire).
- Indirect Loss: Secondary financial loss due to a direct loss, such as costs incurred while repairing property (e.g., rental expenses).
Fire Insurance
- Fire insurance covers material damage to properties like homes, shops, and factories.
- Insurers indemnify repair or reinstatement costs based on the agreed sum insured and terms of the policy.
- Essential for property owners to secure fire insurance to safeguard against potential losses.
Scope of Fire Insurance
- A standard fire policy covers damages from:
- Fire-related incidents
- Lightning strikes
- Explosions (from domestic boilers or gas used for domestic purposes)
- Damage from water or extinguishing agents
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Description
Test your understanding of the fundamental principles of general insurance, including indemnity, contribution, and subrogation. This quiz covers how these principles ensure fair compensation and prevent unjust enrichment. Challenge yourself to see how well you grasp these concepts!
