The insurer takes great risk when writing a policy for their client.  Since the insurer does not really know the value or the current state or condition of what is being insured, there is a latent risk that the item may not be worth as much as it is being claimed to be.  For insurers to protect themselves from being undermined, they created six principles of insurance which all insurance companies follow.  This allows them to safeguard their best interest from people or entity who attempt to cheat loopholes within their system or policies.

Utmost Good Faith – it is understood that a client who is insuring something will declare and disclose everything needed about the item.  This will allow proper evaluation of value of the item being insured.  It is the obligation of the client to fully disclose what is needed to be disclosed.  Non-disclosure of crucial information means attempt to commit fraud.

Insurable Interest – if an item is of no important value to you, then there is really no reason for you to insure it.  To insure something that is of no value to you means you would not mind missing it or losing it and can be considered as an attempt to commit fraud.  Only items that are of value to their owners are insurable.

Indemnity – the insurer will only compensate the amount necessary to repair or replace what has been insured.  Depending on the policy, if an insured item becomes damaged or stolen, only the amount valuing the item will be given.  Once claims have been given, the insurer will indemnify that everything is now in its pre-damaged condition.

Proximate Cause – since there are different coverage available for each insurance type, damages resulting from a different cause from that of the coverage purchased will not be provided with claims.  For example, your home is insured for hurricane and wind damage but not flood damage.  If the cause of the damage is flood, even though the flooding was brought by the hurricane, the insurer will not provide you with claims.

Subrogation – any third party causing damage will be sued by the insurer to compensate for the claims given to the policyholder.  Normally, the compensation is worth more than the amount of claims given.

Contribution – a policyholder cannot be insured with the same policy and coverage with more than one insurer.  If claims will be made under such circumstance, only one claim will be provided and the amount will be shared by the insurance companies.