Principle of Utmost Good Faith in Insurance

What is the principle of utmost good faith in insurance?

According to the principle of utmost good faith, what are the responsibilities of the insured and the insurer?

Answer:

The principle of utmost good faith is a fundamental principle in insurance which requires both the insured and the insurer to be completely honest and act with integrity.

The insured provides accurate information and pays the premium, while the insurer treats the insured fairly and fulfills their contractual obligations.

Explanation: The principle of utmost good faith, also known as the doctrine of utmost good faith, is fundamental to the field of insurance. According to this principle, the insurer and the insured must act with complete honesty and integrity when entering into an insurance contract. The insured party agrees to provide accurate information about relevant risks to the best of their knowledge and to pay the agreed premium. On the other hand, the insurer promises to treat the insured fairly, such as by fulfilling the agreed-upon terms of the policy and not deceiving the insured.

For example, if a policyholder discloses a pre-existing health condition when applying for health insurance, the insurer must act in good faith by charging an appropriate premium and not denying coverage without a reasonable basis.