Explain the following insurance terms; (a) proximate cause (b) surrender value (c) contribution (d) utmost good faith (e) premium

Insurance terms explained:

1. Proximate cause: This is the active, direct and effective cause that sets in motion a chain of events producing a loss, without the intervention of any new and independent force. The insurer is only liable for a loss whose proximate (nearest real) cause is a peril insured against. For example, if a fire causes a wall to collapse and damage goods, the proximate cause of the damage is the fire.
2. Surrender value: This is the cash amount the insurer pays to a life-policy holder who decides to discontinue and cancel the policy before it matures. It represents part of the premiums already paid, less the insurer's charges. It applies mainly to life assurance because such policies build up value over time.
3. Contribution: This is the principle under which, where the same risk is insured with more than one insurer (double insurance), each insurer bears only a rateable proportion of the loss. It prevents the insured from recovering more than the actual loss from the several insurers. It applies to indemnity policies.
4. Utmost good faith (uberrimae fidei): This is the principle that both parties to an insurance contract must fully and honestly disclose all material facts relating to the risk, whether asked or not. If the insured conceals or misrepresents a material fact, the insurer may repudiate the contract.
5. Premium: This is the consideration (money) paid by the insured to the insurer, usually periodically, in exchange for the insurer's promise to indemnify or pay a benefit on the happening of the insured event. It is calculated on the basis of the degree of risk involved.