Question 77

The principle of insurance that states a person should be made whole, no better, no worse, is indemnity.

Indemnity is a foundational principle in insurance that ensures an insured party receives compensation for their loss, restoring them to their original financial position without profit from the loss.

A) adhesion.

The principle of adhesion refers to contracts where one party has significantly more power than the other, often resulting in a "take it or leave it" scenario. While it is relevant in insurance contracts, it does not address the concept of restoring the insured to their pre-loss condition.

B) indemnity.

Indemnity is the correct principle as it specifically emphasizes that the insured should be compensated for their loss in such a way that they are neither financially better nor worse off after the claim is settled. This principle prevents the insured from profiting from their loss, maintaining fairness in the insurance process.

C) subrogation.

Subrogation allows an insurer to pursue a third party responsible for a loss after compensating the insured. While it is an important aspect of insurance, it does not relate to the principle of making someone whole, which is specific to indemnity.

D) aleatory.

Aleatory refers to contracts where the outcomes are dependent on uncertain events, such as in the case of insurance policies where the premium paid does not guarantee a payout. This principle does not address the restoration of the insured's financial status following a loss.

Conclusion

Indemnity is the principle that directly addresses the need for the insured to be made whole after a loss, ensuring they do not gain an advantage from their claim. In contrast, adhesion, subrogation, and aleatory principles focus on different aspects of insurance contracts and do not fulfill the requirement of restoring the insured to their original condition. Thus, indemnity is the definitive principle relevant to this question.