Buying Your First Insurance Policies: A Guide for Everyone

Insurance Principles: What They Mean for Your Truck's Insurance Policy

If you own a truck that makes frequent delivery trips, it is important to cover it using an insurance policy. Technically, the term cover means that the insurance policy protects you against incurring huge losses in case the truck is damaged, stolen, or involved in an accident. When going for an insurance cover, you have the option of taking a limited cover that protects against a specified peril. On the other hand, you can also opt for a comprehensive cover that will protect you from losses resulting from many hazards. It is important for you to know that insurance policies are governed by several insurance principles. Here are a few insurance principles you should know, plus the implications they have on your insurance cover:

The Principle of Proximate Cause

The principle of proximate cause focuses on the identification of the immediate cause of the loss. It is applied when there are two or more perils (hazards) involved in causing the loss. In such a case, the firm that issued that insurance policy to you will have to assess the situation and determine if they are liable to pay you.

Take a case where you have insured your truck against a traffic accident. It then happens that your driver was driving the truck carelessly because they were under the influence of drugs. In such a case, the firm that issued you the insurance policy is not liable because the immediate cause of the loss is not a traffic accident but a reckless driver who caused the accident.

The Principle of Subrogation

If you take an insurance policy from two companies, you are not entitled to claim the amount you have lost from both of them for the same peril. Instead, the two companies should share the cost of the loss. Take a case where you have a policy from two firms to cover your truck against damage by fire. In case it occurs, you cannot claim the reimbursement from both of them. They will share the cost. The essence of this principle is to ensure that you do not make a profit by receiving double the amount of the value of the loss that you have incurred. 

The Principle of Indemnity

The indemnity principle deals with the amount of money you should receive from the firm that issued you the truck insurance policy. Essentially, insurers work towards ensuring that they put you back in the position you were in before the loss occurred. Therefore, if you have used the truck for a certain period and damage occurs to it, the insurers will consider value lost through depreciation. They will give you the money equivalent to its current value and not necessarily the amount you used to buy it.