Question

Which of the following statements is/are correct regarding insurance contracts?

I. The principle of insurable interest is closely aligned with the principle of indemnity, which both limit the insured from experiencing a gain using insurance.

II. A subrogation clause in an insurance policy requires that the insured relinquish a claim against a negligent third party if the insurer has already indemnified the insured.

Answer 1

The principle of insurable interest is closely aligned with the principle of indemnity. A subrogation clause requires the insured to relinquish a claim against a negligent third party if the insurer has already indemnified the insured.

Step-by-step explanation:

Statement I is correct. The principle of insurable interest ensures that the policyholder has a financial stake in the insured event. This principle is closely aligned with the principle of indemnity, which limits the insured from experiencing a gain using insurance.

Statement II is correct. A subrogation clause in an insurance policy allows the insurer to seek reimbursement from a negligent third party after indemnifying the insured. The insured must relinquish any claim against that third party.