MANAGEMENT

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: -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-3: -Therefore, the term “utmost good faith” is used in insurance contracts. The parties are required by law to voluntarily disclose the information. There is also the remedy to breach of such contracts which renders the contract terminated upon breach which might not necessarily contribute to the loss.

Detailed explanation-4: -A term where both the policyholder and the insurer agree not to withhold information or provide false information that could affect the policy.

Detailed explanation-5: -An example is when we buy vehicle insurance for the risk of loss and damage over a period of one year. If both parties hold the principle of utmost good faith, the insured will not make a claim if the insured risk does not occur. Conversely, if the risk is true, the insurance company will approve the claim filed.