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Fundamental Insurance Principles

Learn the general principles and concepts underlying all insurance.


Insurance is a contractual arrangement. In this contract, one party pays up front for the other party’s promise to protect against a possible future loss. Like all contracts, insurance contracts are governed by general contract laws and principles. However, insurance contracts are also governed by fundamental principles that are unique to insurance.

Let’s look at those fundamental insurance principles.

I. Fortuity

We’ll start with fortuity, which means chance events. Insurance protects against...