Principal can be confused with capital, which may consist of anything that can enhance a person's power to perform economically useful work. You can’t seek safety of principal and then take a plunge with investment into the riskiest of common stocks.  Insurance companies take the risk that it will not pay our more to you than the your original principal plus its investment earnings. 
Also see time value of money, for a more detailed description of how these returns may be analyzed relative to principal.
From principalis: "first in importance," or "money on which interest is paid."