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Be it for an individual or an organization, principles form the base of conducting fair practices and constantly acts as a reminder to be just. The absence of principles eventually results in the downfall of a company. Therefore, every industry has its own set of principles to follow. There are various principles prevalent in the insurance industry too. In this article, we’re going to focus on the principles of life insurance.
Life Insurance is basically a contract between an individual and a company. When the insured person passes away or the policy is matured, the insurer pays a certain sum of the amount promised in exchange for a premium. Such an agreement is of great significance for both parties and therefore certain principles are followed to ensure just and smooth functioning.
Life insurance is based on several principles that are customized as per the market conditions. It also makes sure that the insurance company receives profit and the insurer gets unfiltered security policies.
In India, there are five major principles of life insurance that are applied, they are as follows:
Life Insurance is a contract and this contract is supposed to be done in good faith by being transparent of all the necessary details. If an individual falsifies/withholds any important information from the company, this may result in serious consequences like termination of the policy. In addition, the insurer is also required to explain all the relevant policy aspects to the applicant. It is the responsibility of the insurer to educate the applicant about the terms and conditions and make sure nothing is hidden from them.
One of the most profound principles of life insurance, insurable interest is related to the interest level a beneficiary other than the insured person, is expected to have. The beneficiary can be anyone as mentioned in the contract. In simple words, it is the coverage that the beneficiary expects after the loss of the insured or the insured’s financial capacity.
Everyone is aware of the risk associated with insurance. The companies, keeping the risk in mind, have to function, offer policies and gain profits accordingly. The principle of risk and minimal loss states that the insured individual should take essential action to protect him/herself from any risks. This involves adhering to a healthy lifestyle, getting regular check-ups done and more.
It is the legal right that the insured gives to the insurance company. Under this, the insurance company gets the power to persuade the third-party that might be responsible for the losses caused to the insured or his belongings.
This principle is implemented when multiple insurance policies have been purchased related to a particular subject matter. It states that the insured cannot claim the loss of one subject matter through different companies or policies.
If you have opted or are planning to opt for life insurance, take note and adhere to the principles of life insurance mentioned above for an easy and hassle-free insurance policy experience.