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What Is The Principle of Proximate Cause?: Poxrietam Uaces Dnimeytni Sorubtainog Ocntibrtouin

This document discusses key principles of insurance: 1) Proximate cause refers to the direct or nearest cause of a loss being the cause for which an insured can claim compensation. 2) The indemnity principle means an insured is entitled to compensation only for their actual financial loss up to the insured value, not to profit from a claim. 3) Subrogation allows an insurer to take over legal rights or assets of an insured after paying a claim. 4) Contribution ensures no profit from multiple insurance policies on the same item by having insurers share compensation amounts proportionate to coverage amounts.

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49 views2 pages

What Is The Principle of Proximate Cause?: Poxrietam Uaces Dnimeytni Sorubtainog Ocntibrtouin

This document discusses key principles of insurance: 1) Proximate cause refers to the direct or nearest cause of a loss being the cause for which an insured can claim compensation. 2) The indemnity principle means an insured is entitled to compensation only for their actual financial loss up to the insured value, not to profit from a claim. 3) Subrogation allows an insurer to take over legal rights or assets of an insured after paying a claim. 4) Contribution ensures no profit from multiple insurance policies on the same item by having insurers share compensation amounts proportionate to coverage amounts.

Uploaded by

Candice Boodoo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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POXRIETAM UACES

DNIMEYTNI

SORUBTAINOG

OCNTIBRTOUIN

1. What is the principle of Proximate Cause?

Proximate cause literally means the ‘nearest cause’ or ‘direct cause’ of loss is considered.

This principle is applicable when there are a series of causes of damage or loss.

Example: If your house is insured against fire, in the event of fire you will be covered. In

addition, any damages directly linked/affected by the fire will also be compensated, such

as door broken by firefighters.

2. What is the Indemnity principle of insurance?

Insured is only entitled to compensation to the extent of the insured's financial loss. An

insured cannot make a profit. The purpose of this principle is to set back the insured to

the same financial position that existed before the loss or damage occurred. Indemnity

means security, protection and compensation given against damage, loss or injury.

Over insurance: if you insure an item for more than its true value, in the event of a loss,

the insured will only be compensated for the true value of the loss.

Under insurance: if an item is insured for less that its true value and losses are

experienced, the insured would only be compensated in proportion to the value they

insured. They may experience a loss.

Example: House valued $100,00

Insured for $70,000

If the house id destroyed, they would only be compensated for the value insured.
3. What is the Subrogation Clause?

Subrogate means ‘to take the place of’. Subrogation refers to the act of one person or

party standing in the place of another person or party. Subrogation occurs when the

insurance carrier takes on the financial burden of the insured as the result of an injury or

accident. The money they pay out takes the place of the article damaged.

Example: If an insured vehicle is damaged and the repairs will cost more than the value

of the vehicle, the insurer will compensate the insured and take the vehicle and sell for

money.

4. Contribution
Insurers come together to compensate the insured to ensure that no profit is made by the

insured. The amount that each insurance company pays will depend on the that was

insured with them. In case the insured took more than one insurance policy for same

subject matter, he/she can't make profit by making claim for same loss more than once.

Example: Raj has a property worth $400,000. He took insurance from Company A worth

$300,000 and from Company B - $100,000.

In case of any damages to his property, he can claim for ¾ of the losses from A and ¼ of the
losses from B.

Conclusion: give flashcards for them to write what they learnt. Pass to another student. Read
aloud.

Evaluation: give papers.

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