What does 'Good Faith' mean in the context of insurance?

In the context of insurance, 'Good Faith' represents a mutual obligation between the insurer and the insured to act honestly and fairly toward one another. This principle ensures that both parties engage in fair dealings and honor the terms of the insurance contract. When both parties uphold the ideals of good faith, it fosters trust and transparency, which are essential to the smooth functioning of the insurance system.

The concept stresses that the insurer must provide coverage as agreed and process claims without undue delay or arbitrary decisions. Conversely, the insured is expected to provide accurate information and notify the insurer of any significant changes that might affect coverage or risk assessment. By affirming that good faith is about consideration for both parties' interests, it acknowledges the balance required for a healthy insurance relationship.