In the business world, every investor is always looking forward to minimizing the rate of risk exposure. A risk is the probability of occurrence of an unforeseen event that can bring about a loss. The risks are widely divided into two parts. The internal and the external risks. The internal risks are those unforeseen happens that are manageable. The business can minimize the risk. The business can operate itself in a way that minimizes the risk.
The external risks are those particular risks that are beyond the control of the business. They aren’t specific to a particular firm. They affect all the firms in the industry. The best way to manage risk is to pass the risk to another party. This is done by insuring the risk. One can use to get auto insurance quotes in Calgary. The insurance business is guided by five main principles. These principles are general to all the insurance contract. This article will discuss the main principles and guidelines of an insurance agreement.
The principle of ultimate good faith
This principle is also called the principle of full disclosure. Under this principle, both the parties are expected to act in good faith regarding disclosure of information. The insured is expected to give full disclosure of all material facts relating to the object of interest. Material information is those information those whose omission and inclusion will lead to a significant impact on the insurance contract.
In life insurance, the insured is expected to give all the historic medical information of the person. In vehicle insurance, the insured is expected to give all the details including the date of manufacture, the mileage coverage, the expected scrap value and the expected lifespan of the property. Insurance should be done before the concrescence of unforeseen happening. If on party acts of dishonesty, the honest party is relieved his part of the obligation.
The insurance company should do its due diligence to ensure that all the information provided is true and honest. Both parties should define what that should be included in the declaration form. The best way to do this it applying through a questionnaire. Only necessary and material information should be captured.
The principle of indemnity
Indemnification means taking back to the social and financial status of a person before the occurrence of the event. All insurance companies work under this principle. The aim of the insurance company is to compensate the insured in the event of the happening of an event insured against. The insured must prove that he suffered financial loss. The insured must directly suffer from the event. The insured should claim compensation from the insuring company.
The burden of proof lies with the claimer. He must prove in good faith that he has undergone monetary loss. The amount of loss must be quantified and measurable through monetary value. After indemnification, the insurance company is entitled to get the scrap material from the insured. The insured should voluntarily surrender the scrap material.
