The correct answer is: D. Uberrima fides
Uberrima fides is a Latin phrase that means “utmost good faith.” In the context of insurance, it means that both the insurer and the insured must disclose all material information to each other before the contract is signed. This is because both parties need to have a clear understanding of the risks involved in order to make an informed decision about whether or not to enter into the contract.
If either party fails to disclose material information, the other party may have grounds to void the contract. For example, if the insured fails to disclose a pre-existing condition, the insurer may be able to deny coverage if the insured later makes a claim related to that condition.
The principle of uberrima fides is based on the idea that both parties to an insurance contract should have equal knowledge of the risks involved. This helps to ensure that the contract is fair and equitable for both parties.
Here is a brief explanation of each of the other options:
- A. Insurable interest is the requirement that the insured have a financial interest in the insured property or person. This means that the insured must stand to lose something if the property is damaged or the person is injured. Without an insurable interest, the insurance contract would be considered a wager and would be unenforceable.
- B. Indemnity is the principle that the insured should be restored to the same financial position they were in before the loss occurred. This means that the insurer should only pay out enough money to cover the actual cost of the loss, not any additional losses that the insured may have suffered.
- C. Proximity is the principle that the insured must be close enough to the loss in order to be able to claim on the insurance policy. This means that the insured must have been directly affected by the loss, and that the loss must have occurred in a place where the insured was expected to be.