Chapter 9 Key Points

Question 1

what are indemnity insurances

Answer 1

insurers agree to pay only when the insured suffers a loss of a particular type, and only for the amount of the loss

Question 2

what are non-indemnity (or contingency) insurances

Answer 2

insurers agree to pay a specified sum when a particular defined even occurs
insured doesn’t have to prove that they suffered a loss, only that the event happened

Question 3

what does the concept of indemnity mean

Answer 3

insurance should provide exact financial compensation for the insured, also means that the insured should not be over-compensated

Question 4

what does the measure of indemnity depend on

Answer 4

the type of insurance involved and the nature of its subject matter

Question 5

factors which could limited the insured’s entitlement to a full indemnity

Answer 5

sum insured/limit of liability
other policy limits
underinsurance/average clauses
excess/deductible
operation of a franchise

Question 6

when can the insured receive more than a full indemnity

Answer 6

cover is provided on a reinstatement basis
new for old cover
agreed value cover
partial losses under valued policies

Question 7

methods of providing indemnity

Answer 7

usually set out in the insuring clause of the policy
payment of money
reinstatement
repair
replacement

Question 8

what is abandonment

Answer 8

action of giving up the subject matter to the insurer

Question 9

what is salvage

Answer 9

the right of the insurer to take over the subject matter

Question 10

what is constructive total loss

Answer 10

only in marine insurance, the cost of recovering the ship or goods would exceed their value when recovered