California Property & Casualty Broker-AgentGeneral InsuranceMedium
In insurance, the principle that states that the insured should not profit from a loss is known as:
- AUtmost Good Faith
- BAdhesion
- CSubrogation
- DIndemnity
Show answer & explanationAnswer & explanation
Correct answer: D. Indemnity
The principle of indemnity states that an insured should be restored to the same financial position they were in prior to the loss, without profiting from the loss. This is a fundamental concept in property and casualty insurance.
Why the other options are wrong
- A. Utmost Good Faith requires honesty and full disclosure from both parties.
- B. Adhesion means the insured must accept the policy as written by the insurer.
- C. Subrogation allows the insurer to recover payment from a negligent third party.
Principle of Indemnity
A fundamental principle in insurance that aims to restore the insured to their pre-loss financial condition, preventing them from profiting from the loss.
- Prevents unjust enrichment.
- Commonly applied in P&C insurance.
- Actual cash value and replacement cost are methods of indemnification.
Memory trick: Insurance principles are the rules of the game, ensuring fairness is always the aim.