Principle of indemnity: a claim should put you back where you were before the loss (make you whole), not leave you better off. Otherwise people would have a reason to cause losses. Example: if two group medical plans cover the same $5,000 hospital bill, coordination of benefits keeps their combined payment at or below $5,000.

Not every A&H policy reimburses actual cost. In life and disability insurance, the only measure of the insurer's liability is the sum payable as the policy provides (Ins. Code §10111). A hospital indemnity policy that pays a fixed cash benefit, which the Code treats as disability insurance (§106(b)(2)), pays its stated daily amount whatever the bill turns out to be.

Utmost good faith: both sides must deal honestly, because the insurer relies on what the applicant tells it. Each party must communicate in good faith the material facts it knows that the other has no means of finding out (§332). Neglecting to communicate what a party knows and ought to communicate is concealment (§330).

Concealment, whether intentional or unintentional, entitles the injured party to rescind (§331). Materiality is judged by the probable and reasonable influence of the facts on the other party, not by whether the fact later caused the loss (§334). Disability income examples are used here; for hospital, medical and surgical coverage, California also bars rescinding after a claim because the insurer skipped its own underwriting (§10384, see the underwriting page).