ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The principle of utmost good faith states that the insurer and insured both must be transparent and disclose all the essential information required before signing up for an insurance policy. It states that both the parties must disclose all the material facts before subscribing to the policy.

Detailed explanation-2: -Utmost good faith is usually divided into 3 components: representations, concealments, and warranties.

Detailed explanation-3: -An insurance contract is known as a contract of ‘Uberrima Fides’, the Latin term for a contract based on ‘Utmost Good Faith’. This means that both you, and the insurer must disclose all material facts^ such as, pre-diagnosed medical conditions, history of illnesses in the family, and other relevant details.

Detailed explanation-4: -The doctrine of utmost good faith, also known by its Latin name uberrimae fidei, is a minimum standard, legally obliging all parties entering a contract to act honestly and not mislead or withhold critical information from one another.

Detailed explanation-5: –Organisation of Commerce and Management. Principles of utmost good faith is only applicable to life insurance contract.