Explain the following terms of principles of Insurance : Principle of Uberrimae fide.

Principle of Utmost Good Faith (Uberrimae Fide): The Principle of Uberrimae Fide is the very basic and primary principle of insurance. A contract of insurance is a contract of uberrimae fide, i.e., a contract of utmost good faith, and if the utmost good faith is not observed by either party, the contract may be avoided by the other party. It is now a well-settled principle that an insurance contract is a contract of utmost good faith and therefore, the contracting parties are placed under a special duty towards each other, not only to refrain from active misrepresentation but to make full disclosure of all material facts within their knowledge. It has been said that there is no class of documents to which the strictest good faith is more rightly required in courts of law than policies of insurance. The principle of uberrimae fide applies to all types of insurance contracts.