General Insurance Principles
Risk vocabulary
Risk is uncertainty about loss. A peril is the cause of loss (fire, wind, theft). A hazard is a condition that increases the chance or severity of loss: physical (icy steps), moral (intent to defraud), morale (indifference, such as leaving doors unlocked), and legal (legal climate raising jury awards). Insurance handles pure risk - loss or no loss - not speculative risk, which offers gain as well as loss. Insurable exposures tend to involve many similar units, accidental loss, definite and measurable loss, losses that are not catastrophic to the insurer, and premiums that are economically feasible.
Core doctrines
Insurable interest is required; in property and liability it is tested at the time of loss, while in life insurance it is tested at application. Indemnity means restoring the insured, not enriching. Subrogation lets the insurer pursue the responsible party after paying, but it does not apply to life insurance. Utmost good faith imposes disclosure duties: representations are statements believed true, warranties are statements that must be true, and concealment of material facts can void coverage. Waiver is voluntary surrender of a known right; estoppel prevents an insurer from asserting a right after misleading the insured. Insurance contracts are contracts of adhesion, aleatory, unilateral, and conditional.
Traps
Questions often test the timing of insurable interest, the difference between representations and warranties, and whether subrogation applies. Proximate cause is the dominant, uninterrupted cause of loss, not necessarily the first event.
Rule of thumb: property insurable interest is tested when the loss occurs; life insurable interest is tested when the policy is applied for.