It is essential to know the importance of insurance principles when preparing insurance contracts, as well as the settlement of claims.
Insurance companies cannot do justice when evaluating insurance claims if these principles are not properly understood. To understand the entire topic of car insurance from the proper perspective, you must first understand these insurance principles.
We will focus on one of these principles: The utmost good faith.
Utmost good faith
The First and the foremost principle of Insurance is the “Principle of Utmost Good Faith”. In product marketing, we abide by the principle of Good Faith. The product can be consumer durable goods like refrigerator, washing machine, cooker, and television, etc., or can be fast-moving consumer goods (FMCG) like soaps, shampoos, rice, and pulses, etc.
Suppose we want to buy a refrigerator we go to the showroom and buy the product by paying the price quoted by the salesman and we are not disclosing any information related to us or our activities. Even the salesman is not supposed to disclose any information unless asked for and if any information is asked by the client then he is supposed to provide the right information. It is guided by the principle known as “let the buyer beware” or in Latin it is called “Caveat Emptor”.
If you are hiring a taxi, you ask the driver to take you to a particular location and he will quote the price without him being interested in knowing anything about you. You are also not interested in getting his information and his antecedents. Once he drops you to the place agreed upon you will pay the amount agreed upon.
But insurance contracts are over and above this. They are termed as contracts of Utmost Good Faith.
What is Utmost Good faith?
Utmost Good faith is nothing but it is the duty of disclosure. What needs to be disclosed is the question, which comes to our mind. We need to disclose all the information which helps the insurers in taking a decision whether to insure us or to reject our proposal. If the insurer is accepting the proposal then the information helps him in providing the terms and conditions to the policy. Hence it is very essential that all the information should be provided to the Insurers.
Must you provide accurate information?
There is a saying that the right information should be provided to the doctors, lawyers, and insurers. This holds good and true. Not providing the correct information may jeopardize the whole contract. In case of doubt as to whether to provide the information to the insurer, it is better to provide the information.
Duty of utmost good faith is applicable to all the parties to the insurance contract. The insurance company should also provide information related to its products, its terms and conditions. A customer may be able to make a knowledgeable decision if he has the right information. Hence it is required on part of the insurer to provide the right and detailed information to the insured.
How does the upmost good faith work?
For individuals, most of the insurance companies insist upon the submission of proposal forms that contain sufficient information related to utmost good faith. Some forms also contain information as to what needs to be disclosed before and during the currency period of the contract.
In motor insurance, the principle of utmost good faith plays a major and important role. When buying the much-needed $20 down car insurance policy, make sure you are transparent with your insurance company. The increasing complexities of motor insurance and the costing of the claims and services require that the right information is obtained from the insured.
The insured on his part also should make sure that the information provided by him is factual and true to the best of his knowledge. Both the parties should have honest and trustworthy dealings as far their contract goes. All the motor insurance contracts including your auto insurance with no down payment or any other, are the contracts of “Uberrimae Fidei”, which is a Latin phrase for utmost good faith.
Duty of disclosure makes the parties to the contract disclose the material facts. A material fact is a fact that influences the judgment of an underwriter or an insurer to accept or reject a particular risk and if accepted then to provide the right terms and conditions. The insured has to disclose the information and he cannot conceal the information intentionally or unintentionally.
Misrepresentation or concealment of the material fact is treated as fraud. The cheap car insurance no deposit company also should disclose the facts which are relevant to the insured and may help them in taking a decision like deductible, any condition which may change the understanding of the contract, policy terms, and conditions, etc.