When a company insures an individual entity, there are basic legal requirements. Several commonly cited legal principles of insurance include:
Indemnity – the insurance company indemnifies, or compensates the insured in the case of certain losses only up to the insured's interest
Insurable interest – the insured typically must directly suffer from the loss
Utmost good faith – the insured and the insurer are bound by a good faith bond of honesty and fairness
Contribution – insurers which have similar obligations to the insured contribute in the indemnification, according to some method
Subrogation – the insurance company acquires legal rights to pursue recoveries on behalf of the insured; for example, the insurer may sue those liable for insured's loss
Causa Proxima or Proximate Cause – the cause of loss (the "peril") must be covered under the insuring agreement of the policy, and dominant cause must not be excluded