1. Principle of utmost good faith: According to this principle, the insurance contract must be signed by both parties (i.e. insurer and insured) in an absolute good faith or belief or trust. The person getting insured must willingly disclose and surrender to the insurer his complete true information regarding the subject matter of insurance.

Example: If any person has taken a life insurance policy by hiding the fact that he is a cancer patient and later on if he dies because of cancer then Insurance Company can refuse to pay the compensation as the fact was hidden by the insured.

2. Principle of insurable interest: As per this principle, the insured must have insurable interest in the subject matter of insurance. It means insured should gain by the existence or safety and lose by the destruction of the subject matter of insurance.

Example: If a person has taken the loan against the security of a factory premises then the lender can take fire insurance policy of that factory without being the owner of the factory because he has financial interest in the factory premises.

3. Principle of indemnity: According to the principle of indemnity, an insurance contract is signed only for getting protection against unpredicted financial losses arising due to future uncertainties. Insurance contract is not made for making profit else its sole purpose is to give compensation in case of any damage or loss.

Example: A person insured a car for 5 lakhs against damage or an accident case. Due to accident he suffered a loss of 3 lakhs. then the insurance company will compensate him 3 lakhs not only the policy amount i.e., 5 lakhs as the purpose behind it is to compensate not to make profit. 

4. Principle of contribution: According to this principle, the insured can claim the compensation only to the extent of actual loss either from all insurers in a proportion or from any one insurer.

Example: A person gets his house insured against fire for 50,000 with insurer A and for 25,000 with insurer B. A loss of 37,500 occurred. Then A is liable to pay 25,000 and B is liable to pay 12,500.

5. Principle of subrogation: According to the principle of subrogation, when the insured is compensated for the losses due to damage to his insured property, then the ownership right of such property shifts to the insurer.

Example: If a person receives Rs. 1 lakh for his or her damaged stock, then the ownership of the stock will be transferred to the insurance company and the person will hold no control over the stock.

6. Principle of mitigation of loss: According to the Principle of mitigation of loss, insured must always try his level best to minimize the loss of his insured property, in case of uncertain events like a fire outbreak or blast, etc. The insured must not neglect and behave irresponsibly during such events just because the property is insured.

Example: If a person has insured his house against fire, then, in case of fire, he or she should take all possible measures to minimise the damage to the property exactly in the manner he or she would have done in absence of the insurance,

7. Principle of Causa Proxima: Principle of Causa Proxrna (a Latin phrase), or in simple English words, the Principle of Proximate (i.e. Nearest) Cause, means when a loss is caused by more than one causes, the proximate or the nearest cause should be taken into consideration to decide the liability of the insurer.

Example: If an individual suffers a loss in A fire accent, then this should already he a part of the contract in order for this person to claim the insurance amount.