DOUBTS ABOUT INSURANCE

This is a post specially written for my Business Law students. But it could be useful for other people. It refers to some frequent doubts about insurance in Spanish legal system.

First important topic you have to know is that the insurer must be a legal person. It’s impossible that a physical person acts as an insurer. The reason is easy. Insurance is a part of the financial system and is strongly controlled by the State. So, it’s necessary that the insurer has a great solvency. So, it’s needed a legal person with a high capital share.

Second aspect in which you can have a doubt is when the policyholder (or the insured) must tell the insurer the known circumstances that might determine the risk. Many students think that they have always to tell the insurer about that, because of the good faith principle. But it’s not in that way. The policyholder only has to tell when he/she is asked to: when he/she is submitted a questionnaire by the insurance company.

Finally, the meaning of the compensation principle. It’s only applicable to damage insurance and means that the insured can’t obtain a profit from insurance. So, he cannot become better than he was at the time immediately prior to accident. And, in case of underinsurance, he cannot obtain a total compensation for the damages suffered, but a proportional between the sum insured and the insured interest.

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