We now understand that insurance contracts provide customers with financial security and protection from any type of uncertainty in the risks covered. However, in order for the contract between the insured and the insurer to function properly, there are a few insurance principles that must be followed according to the law.

•  Principle of Loss Minimization – This principle applies to the insured where he is made aware that he should be responsible to minimise any kind of loss that might happen to him knowingly. This way the insured will be more careful and will protect himself in most circumstances. Though the loss or damage may be unintentional or uncertain the policyholder must take steps to minimise the after-effects.
•  Principle of Proximate Cause – As the name implies it’s the principle that refers to the nearest cause for the loss or accident or injury that occurs. The principle however tells that the nearest cause must be taken into account to decide further on the liabilities.
•  Principle of Utmost Good Faith – The insurance contract needs both the insurer and the insured to be in utmost good faith to ensure fairness in the event of any uncertainties. All material information is required to be disclosed to each other by both parties.