Principles of Insurance are as follows : 

1. Utmost Good Faith (uberrimae fedie) : The contract of insurance are based on the principle of utmost good faith. It implies that both the parties to the contract must disclose all material information truly and correctly. Misrepresentation or failure to reveal material information gives the aggrieved party the right to regard the contract as void. 

2. Insurable Interest : Every insured person must have the insurable interest in the subject matter of insurance. There can be no insurance if there is no insurable interest. Insurable interest implies monitary interest, without which no insurance contract is valid in the eye of law. Insurable interest is said to exist when the insured party is benefited by safety of the property and is prejudiced by its loss. If a person goes in for insurance without insurable interest in the insured commodity, the contract will be null and void. 

3. Contract of Indemnity : The word ‘indemnity’ means security against loss. In other words, indemnity implies a promise to compensate in case of a loss. The principle of indemnity is applicable to all types of insurance policies, except life insurance. The insured will be compensated only up to the amount of loss suffered by him. The insured party cannot make a profit out of this insurance contract. An insured can get nothing more than the actual amount of the loss suffered. Here, the insurer undertakes to compensate the insured for the loss caused to him by the damage or destruction of the property insured. The principle of indemnity is applicable in case of fire insurance and marine insurance. 

4. Doctrine of Subrogation : According to the doctrine of subrogation, after the insured is compensated for the loss caused by the damage to die property insured by him, the right of ownership of such property passes on to the insurer. It signifies that, if the insurer indemnifies the insured the loss in full, the insurer is entided to recover any benefit due to the insured from a third party. If the insured party gets compensation for the loss suffered by him, he cannot claim the same amount of loss from any other party. If the insured claims compensation from both the sides, he will be in a better position than earlier. The principle of subrogation is applicable to fire insurance and marine insurance. 

5. Causa Proxima (or proximate cause) : Causa proxima means the nearest cause and not the remote cause to be looked into. 

Causes of loss may be of two kinds : 

(a) insured perils ; and (b) uninsured perils. The insurer is liable for a loss when such loss must have been proximately caused by the insured perils. The insurer is, in no case, liable to compensate for the damages arising directly or indirectly on uninsured perils. Suppose, a property is insured against fire, but it is damaged due to a road accident; in this case the insurance company is not responsible. Therefore, an insured can recover damages, if the cause is immediate or proximate to the loss.