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Question
"The insurer undertakes to put the insured, in the event of loss, in the same position that he occupied before the event." Which principle of insurance is referred to in this statement?
Options
Utmost good faith
Insurable interest
Indemnity
Subrogation
Solution
Indemnity
Explanation:
Indemnity implies compensation. According to this principle, the insurer shall compensate the insured in case of a loss against which the policy was issued. The purpose is to place the insured financially in the same position as he was before the loss. The logic behind this principle is that the insured should not be allowed to make a profit from his loss. The principle of indemnity is not applicable to life insurance. This is because human life can not be valued in terms of money.
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