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Property and Liability Insurance Principles

Property and liability insurance are two important types of insurance that provide financial protection against losses resulting from unexpected event

Ruangojol.com - Property and liability insurance are two important types of insurance that provide financial protection against losses resulting from unexpected events. These two types of insurance have their own unique principles that govern how they work.

Property Insurance Principles

The principle of property insurance is to protect individuals or organizations against the financial loss of physical property due to unexpected events such as fire, theft, or natural disasters. The following principles apply to property insurance:

  • Insurable Interest: The insured party must have an insurable interest in the property being insured. This means that the party must have a financial stake in the property, such as owning it or having a legal responsibility to maintain it.
  • Indemnity: The purpose of property insurance is to provide compensation for the loss or damage of the property. The amount of compensation should be enough to replace or repair the property, but not to provide a financial gain to the insured party.
  • Contribution: If multiple insurance policies cover the same property, each policy should pay a proportionate amount of the loss or damage, based on the level of coverage provided by each policy.
  • Subrogation: If the insurance company pays a claim for property damage, the insured party must transfer their rights to sue the responsible party to the insurance company. This allows the insurance company to recover the amount paid to the insured party from the responsible party.

Liability Insurance Principles

Liability insurance is designed to provide financial protection for individuals or organizations against claims made by third parties for bodily injury or property damage caused by the insured party. The following principles apply to liability insurance:

  • Duty to Defend: The insurance company has a duty to defend the insured party against any covered claim, even if the claim is groundless or fraudulent.
  • Duty to Indemnify: The insurance company has a duty to indemnify the insured party for any covered losses or damages resulting from the claim.
  • Limits of Liability: The insurance policy will specify the limits of liability for the coverage provided. If the damages exceed the limit of liability, the insured party will be responsible for paying the excess amount.
  • Exclusions: The insurance policy may exclude certain types of claims or damages, such as intentional acts or criminal behavior.


Property and liability insurance provide important financial protection against unexpected events that can result in loss or damage to property or bodily injury. Understanding the principles of these two types of insurance can help individuals and organizations to make informed decisions about the type of coverage that is best suited to their needs. With the right insurance policy in place, individuals and organizations can have peace of mind knowing that they are protected in the event of a covered loss or damage. 

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