Umbrella Insurance
Umbrella Insurance
Umbrella Insurance
For example:
Many individual people purchase health insurance policies and they
each pay a small monthly or yearly premium to an insurance company. When a
policyholder gets ill, the insurance company provides money to cover medical
treatment. For some individuals the insurance benefits may total far more money
than they have ever paid into the insurance policy. Others may never make a claim.
When averaged out over all of the people buying policies, value of the claims even
out. Insurance companies set their premiums based on their calculated payouts.
They plan to take in more money (in premiums and in profit from the float, see
below) than they pay out in the end to cover expenses. For-profit insurance
companies set their rates to make a profit rather than to break even.
Insurance companies also earn investment profits, because they have the use
of the premium money from the time they receive it until the time they need it to
pay claims. This money is called the float. When the investments of float are
successful, they may earn large profits, even if the insurance company pays out in
claims every penny received as premiums. In fact, most insurance companies pay
out more money than they receive in premiums.
The excess amount that they pay to policyholders is the cost of float. An
insurance company will profit if they invest the money at a greater return than their
cost of float.
HISTORY OF INSURANCE:
Insurance probably made a beginning in the ancient land of Babylonia In the
18th century B.C., Babylonian king Hammurabi developed a code of law, known
as the Code of Hammurabi, which codified many specific rules governing the
practices of early risk-sharing activities. For instance, the code dictated that traders
had to repay merchants who financed trading voyages unless thieves stole goods in
transit, in which case debts would be cancelled.
This was similar to the system of insurance known as bottomry which
existed in Phoenicia in 1200 B.C. In this system, backers loaned money to
merchants to finance voyages. Merchants offered their ships (the hull was known
as the ships bottom) as collateral for such loans. When a trip succeeded, the
merchant would pay the trips backer the original loan plus interest, the equivalent
of a premium. If a ship went down on its voyage, the trips backer would cancel the
merchants loan.
The Greeks and Romans developed the earliest systems of life insurance.
They formed societies which paid dues that went toward paying for the burial of
members. Sometimes these societies also paid for the living expenses of deceased
members families. During the Middle Ages (5th to 15th centuries A.D.), workers
joined together in craft. Many guilds, particularly in England and Italy, provided
benefits to workers and their families in the event of illness or death.
INSURANCE PRINCIPLES:
Main principles of Insurance:
Indemnity :
On the happening of an event insured against, the Insured will be placed in
the same monetary position that he/she occupied immediately before the
event taking place. In the event of a claim the insured must:
Subrogation:
The right of an insurer which has paid a claim under a policy to step into the shoes of
the insured so as to exercise in his name all rights he might have with regard
DEFINATION
INTRODUCTION OF INSURANCE
Insurance companies in India are governed by the insurance Act 1938, though
consequent to the nationalization of life insurance business 1956, the provisions of
the respective legislations apply to them.
Insurance is a means of protection of the economic value of assets. It is method of
spreading over large number of persons, a possible financial loss, which cannot be
borne by individual. The occurrences which cause any damage to the assets are
called perils.
Insuranceis a financial device for transferring or shifting risk from an
individual orentity to a large group with the same risk. This is accomplished
through a contract,the insurance policy, with an insurance company. Under this
arrangement, the individual,along with other insureds, pays a sum to the insurance
company. In turn, theinsurance company agrees to pay an amount of money
(reimbursement) to the individual,or on behalf of the individual, if the events
described in the policy occur.Insurance is used to indemnify, or restore, a
policyholder to a pre-loss condition. Theindividual accepts a known cost, the
premium, in exchange for payment of a large,uncertain financial loss. The
insurance company combines, orpools, a large numberof similar units (homes,
autos, businesses, etc.) and thus can predict losses withinthese units.
Insurance is social device to reduce or eliminate a risk of loss to life and
property. A group of individuals transfer risk to another party in order to combine
loss incurred. It includes statistical prediction of losses and provide for payment of
losses from fund contributed by all members who transfer risk. Thus collective
bearing of risk is immense. Life insurance exist because there is uncertainty
regarding the timing and manner of death; though it is certain.
With largest number of life insurances policies in force in the world,
insurance happens to be a mega business in India. It is business growing at 15 to 20
percent annually together with banking services it adds about 7 percent of GDP.
Gross premium collection percent of GDP and funds available with LIC for
investmentAre 8 percent of GDP. Get nearly 80 percent of the population is
without life insurance cover. The insurance sector to the extend can enable
investment in infrastructure development to sustain economic growth of country.
Insurance companies not only provide risk cover to infrastructure project they also
contributes long term capital.
HISTORY OF INSURANCE
The insurance Act was passed 1938 and was brought into force from 1 st July 1939.
It was a well balance and was the first comprehensive piece of insurance
legislation in this country governing both life and non-life branches of insurance
this Act provided to prevent mushrooming of companies, to enforce working on
sound principles, to prevent misappropriation of fund and to protect the assets.
The Act was wide and more comprehensive. There was strict control over the
insurance business. Since 1938 there were 6 amendments up to 1945. In 1945 it
was deemed necessary to protect the interest of insured companies.
Therefore a committee was appointed under the chairmanship of Shree Kavsaji
Jahangir. On the basic of the committees recommendation, and amendment bill
was made on 18th April 1980 by the parliament. As per the amended Act the total
right was with central Government. It controls the insurance business by
appointing controller of insurance. The insurance companies violating the rules and
regulations are penalized under this Act.
This Act applies to all types insurance business life, fire, marine, etc. done by
companies incorporated in India or elsewhere
UMBRELLA INSURANCE:
For example, let's say that you rear-end a luxury vehicle, and
it turns out that you must pay far more than your insurance
coverage allows. If you don't have an umbrella insurance policy,
you'll need to figure out where to get that money. But if you do
have umbrella insurance, then that policy would kick in and you
would likely pay nothing out of pocket.
It used to be that only the very wealthy needed umbrella
insurance. But anyone can be sued for any reason at any time,
and umbrella insurance provides added protection against losses.
If someone falls on your front steps or your tree falls on a
neighbor's house during a storm, they can successfully sue you
for damages.
Anything that happens on your property or because of your
property is fair game and not always covered by traditional
homeowners' insurance. Umbrella policies provide protection in
many situations that usual liability policies don't cover. While
being wealthy isn't a prerequisite for needing umbrella insurance,
most people who fall into this category need it. Obviously, the
more money you have, the more of a target you become for
lawsuits, and the more you have to protect.Umbrella insurance
refers to a liabilityinsurance policy that protects the assets and
future income of the policyholder above and beyond the standard
limits set on their primary policies.
Typically, an umbrella policy is pure liability coverage over
and above the coverage afforded by the regular policy, and is sold
in increments of one million dollars. The term "umbrella" is used
insurance
provides
broad
insurance
beyond
On the other hand, there may be coverage under the policy but no liability on
the part of the insured. For example, the Personal Auto Policy provides coverage
for property damage up to the policy limits. However, if the insured vehicle is
stolen and the thief uses the car to damage several lawns in the area, the insured
has no liability for the damage. Even if the insured feels sorry for the neighbors
and perceives some moral obligation to repair their lawns, he or she has no legal
liability to do so. Likewise, the insurance company has no responsibility, either by
way of settlement or as a gift, to make any payment to the neighbors. In this case,
while three may be coverage under the policy, but there is no liability on the part of
the insured.
Insureds should be cautioned to remember that even when there is no
apparent liability on the part of the insured or available insurance coverage, the
insured may still be sued and found legally responsible. In a civil case, it is
possible that the plaintiff, who must establish his or her claim by a preponderance
of evidence, may produce evidence that is more credible and convincing than that
of the defendant's. And, if the plaintiff's case is more believable, the plaintiff will
win.
The settlement the plaintiff receives might be quite substantial because of three
factors:
$ The public's attitude toward claims;
$ The application of the law of negligence; and
$ The jury's opinion about damage awards.
The insurance company that issues the umbrella policy provides additional
liability coverage over the primary policies, up to the limits listed on the
Declarations page of the umbrella policy, even if the same insurer does not
provide the underlying insurance.
The personal umbrella policy covers any number of accidents or occurrences
that occur during the policy term, regardless of how many claims are
presented. However, the policy restricts payment for any one accident to the
limit listed in the policy (usually up to $1 million per occurrence). In other
words, even though the insurer may pay for ten claims totaling $10 million
during a one-year period, it will not pay more than $1 million for any one
occurrence.
To limit the insurer's liability, however, many umbrella policies are
beginning to offer aggregate limits, meaning a maximum dollar amount that
may be paid during the policy period or during the insured's lifetime, as
specified in the policy.
A policy with a $10 million aggregate limit, for example, may pay several
claims for $1 million each, but it will only pay out a maximum of $10
million during a given policy period.
It is important to remember that the personal umbrella is a third party
liability policy that covers only another person's claim against the insured. It
does not cover damage to the insured's own property, motor vehicles, home
or other valuables.
numbers can vary widely. Let's look at some of the factors that go into deciding
umbrella insurance rates:
Your risk:
If you have a risky lifestyle or company, then your umbrella
insurance rates will be higher than average. In the context of umbrella
insurance, risk is defined as anything that raises your chance of being
sued. Owning a sports arena or bar qualifies as a high-risk activity.
Your location:
Umbrella insurance rates vary across states and cities.
When you are looking for an insurance company to provide umbrella coverage for
yourself or your business, it's extremely important that you first get an umbrella
insurance quote before making any decisions.
An umbrella insurance quote is basically an estimate of how much coverage
the company will provide for you, including the rate and deductible. This step is
vital because every insurance company offers different rates and options at any
given time. You can present the same information to five competing insurance
companies, and come away with five different umbrella insurance quotes. If you
were to perform the same comparison next month, all the numbers would be
different, because rates and company variables change constantly.
To get an umbrella insurance quote, you will need to give the company some
key information about your needs. This usually includes your assets (all types of
vehicles, your home, real estate of any kind, retirement funds, etc.), risk factors,
current insurance policies, , criminal history, and insurance claim history.
The umbrella insurance quote isn't a substitute for a contract. It's more like
the price tag. Once you find a company that provides an acceptable quote for your
individual umbrella insurance needs, you will need to set up an appointment to
sign the official paperwork.
can
also
be
made
for
legal
and
defense
fees.
An umbrella policy will also cover liability coverage when you are sued for
slander, libel, false arrest, malicious prosecution or other personal liability
situations. Most personal umbrella policies do not cover punitive damages,
intentional actions or liability incurred in connection with your business activities.
Below are some of the common misconceptions contractors have whilst using an
Umbrella Company:
It is a myth to think that the personal liability umbrella policy is only for he
rich.
It is a myth to think that personal umbrella insurance is
expensive.
extremely
It is myth to think that insurance is necessary for only the bread winner of
the family.
It is myth to think that you would not need flood insurance since you are
living in a low risk area.
An Umbrella Company or Composite Company can pay me a minimum
salary and dividends, which will earn me more money.
I can just switch Umbrella Company when I breach the 24 month rule
continue to claim expenses.
The higher my expenses, the higher my net pay will be.
History
Key Features
Duty to defend form
Acting like an umbrella it sits over multiple primary policies, in addition to
providing broader coverage
it provides excess limits when the limits of underlying liability policies are
exhausted by the payment of claims
Umbrella comes with a drop-down feature, narrowing coverage gaps
Key Exclusions
War
Asbestos exposure
Any obligation of the Policyholder under Workers Compensation Law
Generally, an umbrella policy pays all of the covered loss that exceeds the
limits of the base orunderlying policy.If, for example, the basic policy paid
$200,000 on a slip and fall injury and the claim was for $250,000,the
umbrella would cover the $50,000 over the basic policy's $200,000 limit.
other
types
of
policies
you
have.
CONCLUSION
I conclude this project study by saying that Umbrella Insurance is very
important & should have more market & value in India as compared with
international insurance market.
The
profitable.
Policies like this should be there in India on large basic that will help the
citizens.
Now, before coming to the conclusion that, despite all the warnings and all
the concerns, you probably don't need umbrella coverage, think about some
of the consequences of not getting it.
The time is coming, if it hasnt happened already, where an insured is sued
for injuries or property damage not covered by either his primary policies or
his umbrella that would have been covered by another umbrella.
As a result, the insured sues his broker for damages caused by a professional
error in not recommending the umbrella policy that would have covered this
lawsuit, and a jury agrees. .