Final answer:
Property insurance policies have the basic purpose of indemnifying the insured. Over-insurance, under-insurance, and fraudulent claims violate this rule, but timely premium payments do not. the correct answer is D.
Step-by-step explanation:
Property insurance policies have the basic purpose of indemnifying the insured, which means providing compensation for covered losses. However, not all of the options listed violate this rule. Over-insurance, under-insurance, and fraudulent claims all go against the purpose of indemnification since they involve either excessive or dishonest claims. On the other hand, timely premium payments do not violate the rule as they ensure that the insured is fulfilling their financial obligations.
Timely Premium Payments do not violate the principle of indemnity in property policies as they are merely payments to maintain the policy and do not affect the claim payment relative to the loss.
The basic purpose of property policies is to indemnify the insured, which means to compensate the policyholder for their loss and return them to the financial position they were in before the loss occurred. Of the options provided, all but one violates the principle of indemnity. Over-insurance can result in the insured receiving more than their actual loss, violating the principle of indemnity. Fraudulent Claims are false or exaggerated claims that can lead to payments above the actual value of the loss, also violating this principle. Under-Insurance means the insured has coverage for less than the full value of the property, which might not entirely violate the principle as it could still proportionally indemnify the loss up to the policy limits. Timely Premium Payments, however, do not violate the principle of indemnity as they are expected payments to keep the policy in force and have no direct impact on the claim payment relationship.