Explain the following principle of insurance : Utmost good faith, Indemnity

cbse
business-services

#1

1.Utmost good faith : It is the duty of the insured to disclose all the material facts relating to risk to be covered. A material fact refers to the fact which would influence the mind of the prudent under-writer in deciding whether to accept a risk for insurance and on what terms.
2.Indemnity: The purpose of indemnity is to restore the insured person to approximately the same financial position that existed prior to the loss. The operated word here are approximately the same and the reason for this is to prevent the insured from profiting from insurance to reduce moral hazards. Indemnity can be defined as the compensation of loss or injury sustained.