General Insurance Principles

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Other general insurance principles apply to the loss. A loss is an event which gives rise to a claim under a policy. Insurance can provide compensation only for the actual value of the property. It cannot cover the loss of sentimental value. A loss may involve financial aspects, the loss/damage or destruction of property, be caused by death or injury or liability (se below).There must be a large number of similar risks so that the likelihood of a claim can be spread among other policyholders. It must be possible to calculate the chance of the loss so that a premium can be set which matches the risk. Loss is the monetary value paid in order to compensate an individual for the damage caused by an incident. The loss suffered by an individual can result from damage to property, injury or death
Liability of a person is the legal responsibility to compensate others for a loss. The person whose action or lack of action is the cause of a loss being suffered is legally responsible for the consequences of the incident.
Losses must not be deliberate and not inevitable. Clearly you could not buy fire insurance for a house that was already burning. Also, there are some risks, which have financial implications so vast that they can be dealt with only by the state. These risks (mainly those arising from war or nuclear / radioactive material) are not normally insurable. Insurance takes the risk away from peoples’ lives and businesses. It brings peace of mind to the policyholder. In return for paying the premiums the policyholder knows that if the unexpected occurs and a loss is suffered, financial compensation will be available from the fund of premiums.