7 principles of insurance your provider will not tell you

Many people will find insurance companies either a rip off or useless given that they will do everything possible to discourage the insured to actually make a claim.


It is no news that Ghanaians don't trust insurance companies much. is investigating into insurance in Ghana, and kicks off a series with business reporter Emmanuel Quist looking at what insurers won't tell clients.

Who has heard a horror story of people battling against their insurance companies for what they thought they were entitled?

At we have found that the situation is almost the same everywhere else in the world, and it is primarily because people don't understand what insurance means and how it works.

"When I am able to build my house, by the grace of God, I will insure it", a 27 year old mechanic I spoke to tells me. And when I asked why,he said,


His answer did not surprise me. That is exactly what I used to think about insurance- that it turns a misfortune into a massive money making opportunity. I insure my car, if anything happens to it, I get millions of Cedis. My mum gets a life insurance policy, should anything happens to her (touch wood) I become a millionaire from the amount of money due me from her insurance policy.

1. This principle of insurance is called the principle of indemnity.

Here, we look at the principles of insurance as well as conditions under which your insurance company will not honour your insurance claim.

2. Principles of Insurable Interest

This means that you must have a personal interest in the object you are insuring.


A person has an insurable interest when the physical existence of the insured object gives him some gain but its non-existence will give him a loss. So you cannot get insurance for a friend's car, you can only get insurance for your own car

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3. Principle of Contribution

This means that you cannot get  a double insurance compensation on an insured item, even if you have acquired two policies for the same item. This practically means that you cannot get get compensation from two  insurance companies on the same third- party motor insurance, even if you insure you car with the two companies. The two companies will have to share the cost of your indemnity or compensation. You are therefore better off sticking with just one policy.


4. Principles of Subrogation

For example: If Mr. Abu crashes his car, the insurance company must replace it, once he satisfies all the conditions. But according to the Principle of Subrogation, Mr. Abu cannot have a new car, plus his damaged one. That will be two cars. He must have only one car.

The ownership of the property is shifted to the insurance company once they replace it.

5. Principle of Loss Minimization

It is your duty to minimize damage to your insured property in times of a disaster, like flood. You are required under this principle to take steps to control, minimize and save damage to the property. You cannot be careless just because you have acquired an insurance policy for the property.


For example:- If Mr. Abu's car is set on fire by an electrical fault, he must do everything possible to put out the fire. He is expected to call the fire service, or ask others for help and additional fire extinguishers. He cannot just stand by and watch the car burn, just because he has insurance for it.

6. Principle of Causa Proxima

Under the principle of Causa Proxima it implies that a property can only be insured for the most immediate cause of damage and not all causes of damage. So in the case of a claim, the insurance company will only pay if the cause insured against is the most immediate cause of the distraction.

7. Principle of Utmost Good Faith

This is the most primary and principal principle of insurance. This means that all agreements are signed by both parties ( insured and the insurer).


They must be truthful to each other in the provision of the necessary information for the contract. All dealings must be done in utmost good faith.


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