CHAPTER SIX
NON-LIFE
INSURANCE
AUTOMOTIVE INSURANCE
Most automobile insurance contracts are
schedule contracts that permit the insured to
purchase both property and liability insurance
under one policy.
The contract can be divided into two separate
contracts.
One provides insurance against physical
damage to automobiles and the other protect
against potential liability arising out of the
ownership or use of an automobile.
The objective of automobile insurance is
to indemnify the insured against accident loss or
damage to high auto
and / or his liability at law for bodily injury or
material damage cause by the use of motor vehicle,
There are two main types of insurance covers in
motor commercial and motor private insurance,
• Comprehensive cover
• Third party cover
Comprehensive Cover
A comprehensive cover provides protection
against a wide range of contingencies.
It includes indemnity in respect of the insured’s
legal liability for death or bodily injury or
damage cause to the property of third parties
arising out of the insured’s vehicle.
The policy also indemnifi es the insured in
respect of all damages to the vehicle caused by
an accidental, external physical means
Third Party Cover
There are two parties involved in an insurance
contract, the insurer and the insured.
Accordingly, any other person who may become
linked in some way with the insurance is regarded
as third party.
A third party only policy covers the insured’s
legal liability (i.e. property damage, death, and
injury) towards other people in the event of an
accident arising out of the use of a motor vehicle.
Classifi cation Of Risks
Private Vehicles:
A motor vehicle used solely for private purposes are
classifi ed as “private vehicles” and are insured under
the “private motor vehicles policy”.
The term “private purposes” does not include use for
hiring, racing, and carriage of goods in connection
with any trade or business.
Commercial Vehicles:
A wide range of vehicles which carry goods and
passengers are classifi ed under this heading and
diff erent rates of premium are supplied depending on
their use and type.
FIRE INSURANCE
Fire insurance is designed to indemnify the insured for
loss of, or damage to, buildings and personal property by
fi re, lighting, windstorm, hail, explosion and a vast array
of other perils.
Coverage may be provide for both the direct loss (that is
actual loss represented by the destruction of the asset),
and indirect loss (defi ned as the loss of income and or
extra expense s caused by the loss of use of the asset
protected).
Originally, only fi re was an insured peril, but the number
of perils insured against has gradually been expended.
EXCEPTIONS
Fires caused by war.
Fires intentionally set by public authorities, and
Fires set intentionally by the insured.
TYPES OF FIRE POLICIES
Va l u e d P o l i c y :
This is a policy where the value of the property to be insured
a g a i n s t fi r e a n d a l l i e d p e r i l s i s d e t e r m i n e d a t t h e t i m e t h e p o l i c y i s
issued. Va l u e d p o l i c y a l s o r e f e r r e d t o a s “ o r d i n a r y fi r e i n s u r a n c e
p o l i c y. ”
T h e i n s u r e r p ay s t o t o t a l v a l u e o f d a m a g e d p r o p e r t y i r r e s p e c t i v e o f
t h e m a r ke t v a l u e o f t h e p r o p e r t y a t t h e t i m e o f d e s t r u c t i o n o r l o s s .
Va l u a b l e ( A u t o m a t i c R e p o r t i n g ) P o l i c y :
Under this policy the indemnity to be paid by the insurer is to be
d e t e r m i n e d a t t h e t i m e o f l o s s o r a f t e r t h e l o s s h a s t a ke n p l a c e .
This policy is often used for properties whether their value cannot
be accurately determined at the inception of the contract, example
a building in process.
F lo at in g P o licy :
U n der t h is po licy the in s u r er co v er s the in t er es t of the
in s u r ed o n as s et s in diff er en t lo ca t io n s .
C o mpr eh en s iv e P o licy :
T h is fo r m o f fi r e in s u r an ce po licy give fu ll pr o t ect io n , n o t
o n ly aga in s t t h e r is k o f fi r e bu t all r elat ed per ils s u ch a s
r io t ; t h eft ; dam age by veh icles , a n imals o r a r t icles fr o m t h e
air, in clu din g a ir cr aft an d t h e like.
S pecifi c P o licies :
U n der t h es e po licies t h e in s u r ed w o u ld get pr o t ect io n t o a
given t y pe o f pr o per t y in a giv en lo cat io n fo r a s pecifi ed
v alu e o f pr o per t y.
TRANSPORTATION/MARINE
INSURANCE
Marine insurance is designed to protect against
fi nancial loss resulting from damage to, or
destruction of owned property, due to the perils
primarily connected with transportation.
It is a contract of transport insurance whereby
the insurer undertakes to indemnify the insured
in the manner and to the extent thereby agreed,
against losses and damages involved in being
transported.
OCEAN MARINE INSURANCE
Contracts concerned primarily with water
transportation are considered to be ocean
marine insurance.
For a considerable time ocean marine insurance
was the only kind of modern insurance.
Insurance has been developed and has attained
a high degree of refi nement in modern-day
commerce.
As world trade grew and values at risk became
larger, the need for coverage became more
HULL POLICIES
It covers physical damage to the ship or vessel.
It is similar to automobile collision insurance
that covers physical damage to automobile
caused by a collision.
In addition, hull insurance contains a collision
liability clause (also called running down
clause) that covers the owner ’s legal liability if
the ship collides with another vessel or
damages its cargo.
CARGO INSURANCE
It covers the shipper of the goods if the goods
are damaged or lost. The policy can be written
to cover single shipment.
If regular shipment is made, an open cargo
policy can be used that insures goods
automatically when shipment is made.
All shipments, both incoming and outgoing, are
automatically covered. The shipper reports to
the insurer at regular intervals as the values
shipped or received during the previous period.
FREIGHT COVERAGE
Such insurance indemnifi es the ship owner for
the loss of earnings if the goods are damaged or
lost and are not delivered.
The money paid for the transportation of the
goods, known as freight, is an insurable interest
because in the event that freight charges are
not paid, the carrier has lost income with which
to reimburse expenses incurred in preparation
for a voyage.
PR O T E C T IO N AN D IN D E M N I T Y I N S U R A N C E (P & I)
It is usually written as a separate contract that
provides comprehensive liability insurance for
property damage or bodily injury to third party.
To provide liability coverage for personal
injuries, loss of life, or damage to property
other than vessels, the protection and
indemnity (P&I) clause is usually added to the
hull policy
INLAND MARINE INSURANCE
Inland marine cargo insurance covers shipments
primarily by land or by air.
Floater contracts:
The practice of insuring property at fi xed location or
while it is being transported by common carrier is well
established.
Property Held by Bailees:
Inland marine insurance can be used to insure property
held by bailee. A bailee is someone who has temporary
possession of property that belongs to another.
Vessel Policies
Cargo Policies
AVIATION INSURANCE
Aviation insurance is a comparatively recent
phenomenon that has been developing with the
development of passenger plans.
Aviation insurance in an insurance that provides
protection against losses or damages to the
diff erent types of passengers, cargo planes, and
associated losses.
Physical damage coverage:
Liability Coverage:
Medical Payments to passengers:
FIDELITY AND SURETY BONDS
Fidelity bonds:
they provide protection against loss caused by
the dishonest or fraudulent acts of employees,
such as embezzlement and theft of money.
Surety bonds:
they provide for monetary compensation in case
of failure by bonded persons to perform certain
acts, such as the failure of a contractor to
construct a building on time.
LIABILITY INSURANCE
Liability Insurance Contracts obligate the
insurer to pay amounts the insured becomes
legally obligate to pay as a result of covered
injury to others.
In addition, the insurer is obligated to provide
legal defense services for the insured against
liability claims to which the coverage applies.
BUSINESS GENERAL LIABILITY INSURANCE
Direct Liability: - it arises out of the fi rm’s own
actions.
Vicarious Liability: - it is also called indirect liability;
most often arises when a fi rm hires an independent
contractor. If the independent contractor injures a
third party, the fi rm hiring the contractor may fi nd
itself named in the lawsuit along with the independent
contractor.
Contractual Liability: - it arises from contractual
agreements in which it is stated that some losses, if
they occur, are to be borne by specifi c parties.
PROFESSIONAL LIABILITY
INSURANCE
The term professional refers to a person with special
skills, education, or knowledge compensated to provide
service to the public.
Professional liability insurance sometimes called
malpractice insurance or errors and omissions insurance
typically commits an insurer to pay all sums that the
insured becomes legally obligated to pay as damages
resulting from providing or failing to provide
professional service.
Illustrative of professional liability insurance contracts
are policies issued to druggist, hospitals, physicians,
surgeons, dentists, lawyers, accountants, and insurance
agents and brokers .
WORKER’S COMPENSATION
INSURANCE
Worker ’s compensation insurance covers loss of
income, medical, and rehabilitation expenses
that result from work related-accidents and
occupations disease.
Insured workmen always retain the right to
claim damages. If an employee is killed or
injured at work as a result of an accident arising
from defective premises or equipment that a
court may award damages against the employer.
Any employer is liable for an employee who
suff ers accidental bodily injury or disease while
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