Insurance Property Insurance Personal Property
Insurance Property Insurance Personal Property
Insurance Property Insurance Personal Property
Answer : Fire insurance covers damage or loss to a property because of fire. It is a specific form
of insurance in addition to homeowners or property insurance, and it covers the cost of
replacement and repair or reconstruction above what the property insurance policy covers. Fire
insurance policies cover damage to the property, and may also cover damage to nearby
structures, personal property and costs because of not having the capacity to live in or use the
property if damages occur.
!--break--Homeowners should document the property and its contents, which makes it easier to
determine the value of items damaged or lost due to a fire. A fire insurance policy may contain
exclusions based on the cause of the fire, such as not covering a fire caused by war.
The policy typically includes additional coverage against smoke or water damage due to a fire. A
fire insurance policy is usually set up for one year. The policyholder may renew the policy
according to the terms of the policy.
Some standard homeowners insurance policies include fire coverage, but others may not. This
coverage may need to be purchased separately, particularly if the property contains valuable
items that are excluded from coverage. The insurance companys liability is limited by the policy
value and not by the extent of damage or loss sustained by the property owner.
Policy Coverage
Fire insurance covers a policyholder against fire loss or damage brought about by the ignition of
fire, electricity, lightning or explosion of gas, natural disasters, and bursting and overflowing of a
water tank or pipes.
Most policies cover a home regardless of whether the fire originates from within the home or
from outside the home. Coverage limits are dependent on the cause of the fire. The policy
reimburses the policyholder on a replacement-cost basis in the event the property is lost, or on an
actual cash value basis for damages.
If the home is considered a total loss, the insurance company may reimburse the owner for the
current market value. If most of the possessions were destroyed in the fire, typically the
insurance company offers a market value compensation for each item. For example, if a policy
insures a home for $350,000, the contents are usually covered for at least 50-70% of the policy
value, or $175,000 to $245,000. Many policies limit how much insurance companies pay for
items such as luxury paintings, diamond rings or fur coats.
Coverage Assessment
A policyholder should check his home's value every year to determine if there is a need to
increase coverage. He can set coverage limits using factors such as the value of the home and its
contents. However, a policy may offer lower coverage limits for certain items, in which case it
helps to purchase additional coverage for luxury items such as jewelry, art and other assets.
Cover your property against fire
This is a basic fire insurance plans which indemnifies you against damage to your property
caused by fire, lightning or explosion only.
You can decide to extend your insurance to cover other perils:
Aircraft damage
Riot, strike, malicious damage
Impact damage
Missile-testing operations
Bush fire
Floater Policy: This policy can be issued for Stocks at various locations
Declaration Policy: To take care of frequent fluctuations in stocks/ stock values,
declaration policy can be availed subject to certain norms.
Floater Declaration Policy: This policy has the features of both floater and the declaration
policies.
Architects', surveyors' and consulting engineers' fees exceeding 3% and debris removal
expenses exceeding 1% of claim amount
Any consequential losses
Q. 2 Define the insurable interest should if be compulsory present in all types of insurance cont
act and act all times
Ans : Insurable interest exists when an insured person derives a financial or other kind of
benefit from the continuous existence, without impairment or damage, of the insured object (or
in the case of a person, their continued survival). A person has an insurable interest in something
when loss of or damage to that thing would cause the person to suffer a financial or other kind of
loss.
Typically, insurable interest is established by ownership, possession, or direct relationship. For
example, people have insurable interests in their own homes and vehicles, but not in their
neighbors' homes and vehicles, and certainly not those of strangers.
The "factual expectancy test" and "legal interest test" are the two major concepts of insurable
interest.
Property insurance
People have an insurable interest in their property up to the value of the property, but no more.
The principle of indemnitydictates that the insured be compensated for a loss of property, but not
paid more than what the property was worth. A lender who grants a mortgage on the security of a
house has an insurable interest in that house, but only up to the amount outstanding on the loan.
Life insurance
Insurable interest refers to the right of property to be insured.[2][3] It may also mean the interest of
a beneficiary of a life insurance policy to prove need for the proceeds, called the "insurable
interest doctrine".[3] Specifically, insurable interest is:
Insurable interest is no longer strictly an element of life insurance contracts under modern law.
Exceptions include viaticationagreements and charitable donations.[4]
The principle of insurable interest on life insurance is that a person or organization can obtain an
insurance policy on the life of another person if the person or organization obtaining the
insurance values the life of the insured more than the amount of the policy. In this way, insurance
can compensate for loss. A company may have an insurable interest in a President/CEO or other
employee with special knowledge and skills. A creditor has an insurable interest in the life of a
debtor, up to the amount of the loan. A person who is financially dependent on a second person
has an insurable interest in the life of that second person.
Legal guidelines have been established in many jurisdictions which establish the kinds of family
relationships for which an insurable interest exists. The insurable interest of family members is
assumed to be emotional as well as financial. The law allows insurable interest on the
presumption that a personal connection makes the family member more valuable alive than dead.
Thus, husbands/wives have an insurable interest in their spouse, and children have an insurable
interest in their parents (and vice versa). Brothers/sisters and grandchildren/grandparents are also
assumed to have an insurable interest in the lives of those relatives. But cousins, nieces/nephews,
aunts/uncles, stepchildren/stepparents and in-laws cannot buy insurance on the lives of others
related by these connections.
UK Law
A person is presumed to have an insurable interest in his or her own life, [6] preferring to be alive
and in good health rather than being sick, injured or dead. The unlimited interest extends to the
life of spouses (and since 2004 civil partners), even if there is no financial dependency.
UK law does not recognize other classes of so-called 'natural affection' however, thus:
Nor is insurable interest recognized for cohabiting couples. Although many insurers will accept
such policies, they could potentially be invalidated because they have not been tested in court. In
recent years, there have been moves to pass clear statutory provisions in this regard, which have
not yet borne fruit.[9]
In practice these problems are solved by people assigning their policies or placing them in trust
with named beneficiaries. If a person obtains an insurance policy on their own life, it is presumed
that the person would only name a beneficiary who wants the insured to be alive and healthy.
There is no requirement that the beneficiary have a proven insurable interest in the life of the
insured when the insured has purchased the insurance.
In 2008, the English and Scottish Law Commissions tentatively proposed some reforms to the
existing law, hoping to clarify the complex rules. Their preliminary recommendations included
increasing the category of natural affection to include dependent children and parents and also
cohabitees. Officially this is still under review.
Credit default swaps
In eConned, Yves Smith argues that credit default swaps were/are used to take out insurance-like
contracts against financial products in which buyers had no insurable interest. This was related to
the financial crisis of 2008 because hedge funds and others allegedly helped produce bad
subprime mortgages on purpose so that they could buy insurance on them, and then profit when
the home buyers failed to make payments.
Q.3 The principal of Indemnity is the most important principal of fire insurance explain is the
any acceptation of this.
Ans The main motive of insurance is cooperation. Insurance is defined as the equitable transfer
of risk of loss from one entity to another, in exchange for a premium.
1. Nature of contract:
Nature of contract is a fundamental principle of insurance contract. An insurance contract comes
into existence when one party makes an offer or proposal of a contract and the other party
accepts the proposal. A contract should be simple to be a valid contract. The person entering into
a contract should enter with his free consent.
2. Principal of utmost good faith:
Under this insurance contract both the parties should have faith over each other. As a client it is
the duty of the insured to disclose all the facts to the insurance company. Any fraud or
misrepresentation of facts can result into cancellation of the contract.
3. Principle of Insurable interest:
Under this principle of insurance, the insured must have interest in the subject matter of the
insurance. Absence of insurance makes the contract null and void. If there is no insurable
interest, an insurance company will not issue a policy.
An insurable interest must exist at the time of the purchase of the insurance. For example, a
creditor has an insurable interest in the life of a debtor, A person is considered to have an
unlimited interest in the life of their spouse etc.
4. Principle of indemnity:
Indemnity means security or compensation against loss or damage. The principle of indemnity is
such principle of insurance stating that an insured may not be compensated by the insurance
company in an amount exceeding the insureds economic loss.
In type of insurance the insured would be compensation with the amount equivalent to the actual
loss and not the amount exceeding the loss.
This is a regulatory principal. This principle is observed more strictly in property insurance than
in life insurance.
The purpose of this principle is to set back the insured to the same financial position that existed
before the loss or damage occurred.
5. Principal of subrogation:
The principle of subrogation enables the insured to claim the amount from the third party
responsible for the loss. It allows the insurer to pursue legal methods to recover the amount of
loss, For example, if you get injured in a road accident, due to reckless driving of a third party,
the insurance company will compensate your loss and will also sue the third party to recover the
money paid as claim.
6. Double insurance:
Double insurance denotes insurance of same subject matter with two different companies or with
the same company under two different policies. Insurance is possible in case of indemnity
contract like fire, marine and property insurance.
Double insurance policy is adopted where the financial position of the insurer is doubtful. The
insured cannot recover more than the actual loss and cannot claim the whole amount from both
the insurers.
7. Principle of proximate cause:
Proximate cause literally means the nearest cause or direct cause. This principle is applicable
when the loss is the result of two or more causes. The proximate cause means; the most dominant
and most effective cause of loss is considered. This principle is applicable when there are series
of causes of damage or loss.
The basic principles that govern Fire Insurance are:
(i) Utmost good faith - In insurance contracts, the legal doctrine of utmost good faith applies.
The insured has the duty to disclose all material facts, which have a bearing on the insurance. A
breach of this duty may make the contract void or voidable. The duty of disclosure continues
throughout the policy period.
The fire proposal form also includes a declaration by the insured saying that the statements
declared by him are true, and that they can form the basis of the insurance contract. This
principles also expect the insured to act as if he is uninsured all the time, and takes care and
safeguards his assets from the perils. Following a loss, he is then expected to salvage as much of
the property as possible.
(ii) Insurable Interest - The requirement of insurable interest gives legal validity to insurance
contracts and distinguishes them from wagers. It may be defined as the legal right to insure,
where the right arises out of a pecuniary relationship between the insured and the subject matter
of
insurance.
The destruction or damage to the latter involves the insured in financial loss. Absolute legal
ownership is a clear example of insurable interest. For e.g, a bank or a financial institution which
has advanced money on the security of a property, has insurable interest in that property.
In Fire insurance policy, the insurable interest should exist at the time of taking the policy,
throughout its currency period and also at the time of loss/claim. Fire insurance policies are
personal contracts, so if the property is sold or transferred, the policy is not transferred
automatically.
(iii) Indemnity - The objective of the principle is to place the insured , as far as possible, in the
same financial position after a loss, as that occupied by him, immediately before the loss.
In simple words, the principle of indemnity means the insured is indemnified only to the extent
of his loss, no profit or undue benefit is extended. The indemnity is subject to the sum insured
and other terms of the policy. The sum insured can be fixed on the basis of Reinstatement Value
or Market Value. The term 'Market value' means, for insurance purposes, the present cost of
construction of similar buildings, after deducting depreciation based on age, usage, maintenance
etc.
Similarly for plant and machinery, market value is arrived at by deducting suitable depreciation
for age, usage, wear and tear etc, from the current replacement costs. In all the cases,
depreciation refers to the actual intrinsic physical depreciation and not those used for accounting
purposes.
(iv) Subrogation - The principal of subrogation is the corollary of the principle of indemnity. If
the loss suffered by the insured can be recovered from third parties who are responsible for the
loss, the insured's rights of recovery are transferred or subrogated to the insurers , when they
indemnify
the
loss.
(v) Contribution - The principle of contribution, which is also a corollary of the principle of
indemnity, provides that if the same property is insured under more than one policy, the insured
can recover a rate able proportion of the loss under each policy. Under no circumstances can he
recover more than his loss, and make a profit.
(vi) Proximate cause - A cause which immediately precedes and produces the effect, as
distinguished from the remote, mediate, or predisposing cause. An act from which a loss or
injury results as a natural, direct, uninterrupted consequence and without which the loss or injury
would not have occurred.
It is the primary cause of a loss or injury. It is not necessarily the closest cause in time or space
nor the first event that sets in motion a sequence of events leading to an injury.
Proximate cause produces particular, foreseeable consequences without the intervention of any
independent or unforeseeable cause. It is the active, direct, and efficient cause of loss in
insurance that sets in motion an unbroken chain of events which bring about damage,
destruction, or injury without the intervention of a new and independent force. It is also called
legal or direct cause.
Q. 4 What risk are generally covered and what risk are generally not covered in fire insurance
policy?
Ans : Fire insurance business is governed by the Fire Tariff that lays down the terms of
coverage, the premium rates and the conditions of the Fire Policy. The fire insurance policy has
been renamed as Standard Fire and Special Perils Policy. The risks covered are as follows:
Fire:
Destruction or damage to the property insured by its own fermentation, natural heating or
spontaneous combustion or its undergoing any heating or drying process cannot be treated as
damage due to fire. For e.g., paints or chemicals in a factory undergoing heat treatment and
consequently damaged by fire is not covered. Further, burning of property insured by order of
any
Public
Authority
is
excluded
from
the
scope
of
cover.
Lightning:
Lightning may result in fire damage or other types of damage, such as a roof broken by a falling
chimney struck by lightning or cracks in a building due to a lightning strike. Both fire and other
types
of
damages
caused
by
lightning
are
covered
by
the
policy.
Explosion/
Implosion:
Explosion is defined as a sudden, violent burst with a loud report. An explosion is caused inside
a vessel when the pressure within the vessel exceeds the atmospheric pressure acting externally
on its surface. An explosion may cause fire damage or concussion damage.
Implosion means bursting inward or collapse. This takes place when the external pressure
exceeds the internal pressure. This policy, however, does not cover destruction or damage caused
to the boilers (other than domestic boilers), economisers or other vessels in which steam is
generated and machinery or apparatus subject to centrifugal force by its own explosion/
implosion. These risks can be covered in a Boiler & Pressure Plant Insurance Policy, which is
specially
designed
to
handle
these
risks.
Aircraft
Damage:
The loss or damage to the property (by fire or otherwise) directly caused by aircraft and other
aerial devices and/ or articles dropped there from is covered. However, destruction or damage
resulting from pressure waves caused by aircraft travelling at supersonic speed is excluded from
the
scope
of
the
policy.
Riot,
Strike,
Malicious
and
Terrorism
Damage:
The act of any person taking part along with others in any disturbance of public peace (other than
war, invasion, mutiny, civil commotion etc.) is construed to be a riot, strike or a terrorist activity.
Any loss or physical damage to the property insured directly caused by such activity or by the
action of any lawful authorities in suppressing such disturbance or minimising its consequences
is covered. Further the wilful act of any striker or locked out worker, in connection with a strike
or a lock out, or the action of any lawful authority in suppressing such act, resulting in visible
physical damage by external means, is also covered. Malicious act would mean an act with
malicious intent but excluding omission of any kind by any person, resulting in visible physical
damage to the insured property, whether or not the act is committed in the course of disturbance
of public peace or not. Burglary, housebreaking, theft or larceny does not constitute a malicious
act
for
the
purpose
of
this
cover.
Total or partial cessation of work or the retarding or interruption or cessation of any process or
operations; or, permanent dispossession resulting from confiscation, commandeering, requisition
or destruction by order of the Government or any lawfully constituted authority; or permanent or
temporary dispossession of any building or plant or unit or machinery resulting from the
unlawful occupation by any person of the same or prevention of access to the same, are not
covered.
Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation:
Storm, Cyclone, Typhoon, Tempest, Tornado and Hurricane are all various types of violent
natural disturbances that are accompanied by thunder or strong winds or heavy rainfall. Flood or
Inundation occurs when the water rises to an abnormal level. Flood or inundation should not only
be understood in the common sense of the terms, i.e., flood in river or lakes, but also
accumulation of water due to choked drains would be deemed to be flood.
Impact
Damage:
Impact by any Rail/ Road vehicle or animal by direct contact with the insured property is
covered. However, such vehicles or animals should not belong to or owned by the insured or any
occupier of the premises or their employees while acting in the course of their employment.
Subsidence
and
Landslide
including
Rockslide:
Destruction or damage caused by Subsidence of part of the site on which the property stands or
Landslide/ Rockslide is covered. While Subsidence means sinking of land or building to a lower
level,
Landslide
means
sliding
down
of
land
usually
on
a
hill.
However, normal cracking, settlement or bedding down of new structures; settlement or
movement of made up ground; coastal or river erosion; defective design or workmanship or use
of defective materials; and demolition, construction, structural alterations or repair of any
property
or
ground-works
or
excavations,
are
not
covered.
Bursting
and/
or
overflowing
of
Water
Tanks,
Apparatus
and
Pipes:
Testing
operations:
Destruction or damage due to impact or otherwise from trajectory/ projectiles in connection with
missile testing operations by the Insured or anyone else, is covered.
Leakage
from
Automatic
Sprinkler
Installations:
Damage caused by water accidentally discharged or leaked out from automatic sprinkler
installations in the insured's premises is covered. However, such destruction or damage caused
by repairs or alterations to the buildings or premises; repairs removal or extension of the
sprinkler installation; and defects in construction known to the insured, are not covered.
Bush
Fire:
This covers damage caused by burning, whether accidental or otherwise, of bush and jungles and
the clearing of lands by fire, but excluding destruction or damage caused by Forest Fire.
How to file for claims under fire insurance
In the event of a fire loss covered under the fire insurance policy, the Insured shall immediately
give notice there of to the insurance company. Within 15 days of the occurrence of such loss the
Insured should submit a claim in writing giving the details of damages and their estimated
values. Details of other insurances on the same property should also be declared.
The Insured should procure and produce, at his own expense, any document like plans, account
books, investigation reports etc. on demand by the insurance company.
Pro-rata
Average
Condition
If at the time of a loss, it is observed that the insured property is of higher value than the Sum
Insured, the Insured has to bear the rateable proportion of the loss. Every item, if more than one,
covered
by
the
policy
is
separately
subject
to
this
condition.
For instance, a firm insures its building for Rs.10 lakhs and plant and machinery for Rs.20 lakhs.
A fire occurs causing loss to plant and machinery and the damage is assessed at Rs.10 lakhs. The
market value of the building at the time of occurrence of fire is assessed at Rs.5 lakhs and that of
plant
and
machinery
at
Rs.25
lakhs.
The building is therefore over-insured, but the plant and machinery is under-insured if
considered separately, as per the policy condition. Collectively, however, the market values of
the assets are same as the value insured for. This does not give any advantage to the Insured.
Since plant and machinery is affected by the loss and its Sum Insured is under-insured by 20
percent in relation to the market value, the insurance company pays Rs.8 lakhs (i.e.80%) of the
actual loss. The Insured has to bear a loss of Rs.2 lakhs for the under-insurance.
On the contrary if there was a loss to the building of say, Rs.2.5 lakhs, the insurance company
would pay the full amount. Nothing extra is payable for over-insurance.
Contribution
Clause
If at the time of loss or damage happening to any property hereby insured there be any other
subsisting insurance or insurances, whether effected by the Insured or by any other person or
persons covering the same property, the insurance company shall not be liable to pay or
contribute more than its rateable proportion of such loss or damage.
For instance, a firm insures its finished goods stored in a warehouse for Rs.50 lakhs with X
Insurance Company. Since the stocks are hypothecated to a Bank, they also insure the same
property for Rs.30 lakhs with Y Insurance Company, thinking that the Insured has not insured
them. There is a fire in the warehouse and the loss is assessed at Rs.10 lakhs.
In such a situation, X Insurance Co. pays 5/8th of Rs.10 lakhs that is Rs.6.25 lakhs and Y
Insurance Co. pays 3/8th that amount to Rs.3.75 lakhs.
Classification of Insurance
Life is full of uncertainty. Trials and tribulations abound in each and every aspect of life. No one
can truly predict or even estimate what the future has in store for him. Life offers no guarantees
by
itself,
except
the
incidences
of
death
and
taxation.
This lack of security present throughout life can be overcome partially through insurance.
Insurance can never replace or repair a loss. But the monetary value offered by insurance helps in
adjusting
to
the
new
circumstances.
Despite offering innumerable options and immense scope, insurance can be classified into four
main
categories.
Insurance
of
Person
Insurance
of
Property
Insurance
of
Interest
Insurance
of
Liability
Insurance
of
Person:
Under the purview of this class of insurance, the risks associated with human life in general can
be covered up to the limit specified. A person can insure his or her life and his health against any
unplanned
contingencies.
In event of his death, his dependants will be reimbursed to the full amount that he was insured
for. Or if the insured person meets with an accident or suffers from an illness that cripples him
forever, he will be compensated with the complete sum assured anyway since he may not be able
to
lead
a
normal
life
again.
In case, the accident is not that severe, he should be able to recover after medical treatment and
rehabilitation. If he has opted for medical cover, then his medical expenses, treatment and
medication
will
be
paid
for
by
his
insurance
policy.
Insurance
of
Property:
Everyone possesses material value in the form of tangible assets. Assets can be in the form of a
landed estate or a vehicle, share holdings or plain old paper money.
Since tangible property has a physical shape and consistency, it is subject to many risks ranging
from fire, allied perils to theft and robbery. An individual's lifetime of hard work can be wiped
out
in
a
blink
of
an
eye.
But if a person judiciously invests in insurance for his property prior to any unexpected
contingency then he will be suitably compensated for his loss as soon as the extent of damage is
ascertained.
Insurance
of
Interest:
Every individual has to discharge certain specific duties. Everyone is expected to maintain a
standard of conduct. But then, it is an intrinsic part of human nature to err. No one is infallible
and
no
one
will
ever
be.
Owing to an occasional error or omission committed by us, our clients or customers might suffer
a loss. In turn we might have to pay them damages or compensation out of our own personal
resources.
However, if our chosen profession qualifies for insurance of interest, then our insurance policy
will more than suffice in arranging for the funds and court formalities that might ensue in the
aftermath
of
legal
libel.
Insurance
of
Liability:
Every person has to regulate his actions and behaviour so as not to cause injury or damage to
other people and their property. Everyone is personally responsible and liable for his actions.
If due to lack of control over his actions or prejudiced behaviour, a person incurs any liability
then he has to provide compensation out of his personal resources. Liabilities: legal, civil or
criminal can have severe repercussions on social standing and prestige besides the financial
status.
By investing in liability insurance, an individual can ward off any liabilities he might incur due
to his actions and behaviour. Besides, the premiums payable on liability insurance are fairly
minimal when compared to the damages that have to be compensated in the long run.
Need for house insurance
Home is where the heart is sums up in short how attached one would be to his humble abode, be
it a pigeonhole or a palatial residence. Whether it is a rented one or your own personal property
insurance is a must to take care of the unpredictable risks to your house such as fire, natural
calamities,
burglary,
short-circuits
etc.
Such incidents would not only cause severe mental agony but the losses you may suffer under
such circumstances can be unimaginably high. And setting up your house all over again can be
quite expensive. But if your house is adequately insured such botherations need not be a cause
for
worry.
Insurance bought for your house will not only cover the structure of the house but will also cover
the belongings. All those expensive items or consumer durables you bought over a period of time
may have been damaged in the fire. But your insurance company will take care of the losses and
indemnify
you
for
it.
Similarly if your house is burgled and your valuables have disappeared your insurance company
will bear your loss. Or for instance, your domestic help, is electrocuted in your house and dies.
The insurance company can pay off the losses and liabilities that may otherwise be a concern for
you,
under
the
Workmens
Compensation
Act.
In other words buying an insurance policy for your house will buy you peace of mind as such
risks are unpredictable but not impossible.
Q.5 State the similarity and difference between fire insurance and marine insurance
Asw. Followings are the main differences between life insurance, fire insurance and marine
insurance:
1. Nature of risk
Life Insurance: The risk is certain in life insurance. The amount of policy is paid either at the
death of insured or on maturity of policy, whichever is earlier.
Fire Insurance: The risk is not certain. It is not necessary that the insured property should catch
fire.
Marine Insurance: The happening of event is not certain. So, risk may or may not arise.
2. Period of insurance
Life Insurance: The policy is generally of longer period.
Fire Insurance: It is usually of one year and may be renewed.
Marine Insurance: This policy is for a short period.
3. Insurable Interest
Life Insurance: Insurable interest must exist at the time of taking policy.
Fire Insurance: The insurable must exist both at the time of taking policy and at the time of loss.
Marine Insurance: The insurable interest must exist at the time of loss occur.
4. Contract Of Indemnity
Life Insurance: It is not a contract of indemnity. The insurance company pays insured amount on
the maturity of the policy.
Fire Insurance: It is a contract of indemnity. Only the actual loss is indemnify in case of loss
caused by fire.
Marine Insurance: It is not purely a contract of indemnity.
5. Determination of premium
Life Insurance: Premium is determined according to the age of insured at the time of policy.
Fire Insurance: Premium is determined according to the risk involved.
Marine Insurance: Premium is determined according to the nature of risk.
6. Payment pf premium
Life Insurance: Payment is made in installments
Fire Insurance: The payment of premium is made on lump sum
If your insurance company pays for damage to your car under the collision coverage, it will
pursue its payment (and your deductible amount) from the party who was at fault for the
accident. It will make a subrogation claim against that persons insurance company. If it recovers
all or part of the loss, you will get a pro rata share of your deductible back again.
Claim recovery also includes salvage. If your wrecked car was deemed to be a total loss
(which means merely that it is financially impractical to repair itnot that it cannotbe repaired),
the wreck has value. It will be sold at an auto salvage auction to a salvage buyer. The money
recovered goes to the insurance company that paid the claim. The salvage buyer will in turn
sell undamaged parts to shops that are repairing other vehicles.
(iv) Distingwish policy and instatement value policy
Answer
Understanding insurance can be a little daunting for people who dont deal with it day to day and
just want the cheapest quote to give them peace of mind that their home is safe.
This means we all need a simple way of explaining the issues around insurance and why some
people feel like theyve lost out. Its all in the legislation, and its in the legislation for a reason,
to protect the insurer and the insured.
There has been a terrible house fire caused by arsonists, the tenant in one of your houses is
waiting for you to come and give them a new home and make everything better. Now of course
you are insured and you ring your insurance company up, but they tell you it will cost more than
the house is worth to rebuild.
This is where the difference in market value and reinstatement value is introduced. It all depends
on where your house is and how much it is worth. You may own an expensive property in the
middle of farm land, or a terraced house in the middle of a city, you would be surprised at how
the circumstances can alter the claim.
There are numerous factors which you have to consider. Damage to a terraced house means
ensuring the surrounding houses are also safe, it involves a lot of work involving the whole
street. This means a shorter time frame and more too do such as checking for dangerous
materials like asbestos.
Damage to the new built property in the farmland means the house can taken away and replaced
without having to consider neighbours or toxic materials.
So yes, you may end up paying more to rebuild a house which, on the market, cost half the price
of a luxury farm house. This does not mean that in every instance it will be easy to rebuild new
detached houses, it does mean that this legislation is in place for a reason and it should be
thought through in detail.
Now you need to speak to your insurer and understand the risks which can apply to your specific
property.
Explosion / Implosion
4.
Aircraft damage
5.
6.
Storm, Tempest, Flood, Inundation, Hurricane, Cyclone, Typhoon and Tornado. (STFI)
7.
8.
9.
10.
11.
12.
13.
14.
Bush Fire
Machinery and equipment temporarily removed for repairs, cleaning, renovation or other
similar purposes for a period of 60 days
Note:
1.
STFI and RSMD perils can be deleted at the inception of the policy for which suitable
reduction in premium rate is allowed.
2.
Fire Policy is an annual policy
3.
Long Term policy (for a minimum period of three years) is also available for "dwellings"
only with suitable discounts in premium.
4.
Cover for STFI and RSMD perils can also be given during currency (where they are
deleted at inception by choice) in special circumstances.