Chapter 9- Measuring The Loss Flashcards
What are most types of general insurances i.e. property pecuniary and liability insurances including motor, Marine and aviation
Indemnity insurances
What are non-indemnity (or contingency) insurances
Where insurers agree to pay specified sum when a particular defined event occurs i.e. like life insurance
What’s sort of Policies are accident and sickness insurances
Non-indemnity insurances
What does the concept of indemnity imply
That the object of insurance it with exact financial compensation and they shouldn’t make a profit on their loss
What happens if insured is tempted to bring his loss deliberately in order to improve their financial position
It introduces an extra element of moral hazard
How can a claimant be able to recover a sum greater than the actual loss
Is there a person with a limited interest in the subject matter such as a Bailee of goods. However they hold the insurance money in excess of their own actual loss for others who have interest in the property
How can a claim under the policy indemnity also be described as
A claim for a Unliquidated damages
What are unliquidated damages
Where the exact amount of a compensation is not known in advance but should be fixed afterwards on the basis of a loss actually suffered
What is the general rule or property insurance indemnity
The loss of any property is determined not by its cost but its value at the date of loss and at the place of a loss
What happens under property insurance indemnity policy is if the value has increased during the policy
The insured is therefore entitled to an indemnity on the basis of increased value subject of course to the adequacy of the sum insured
What happens on the property insurance if the value has decreased during the period of insurance
Be sure to recover only the reduced value at the time of the loss not the original value
What happens under a claim for property insurance
The policyholder can we cover only the amount of the value of the property itself they can’t claim for loss of prospective profits or other consequential losses unless this is specifically insured
What happens if a property is destroyed by fire can insured recover under their fire policy for loss of trade and the cost of hiring of a premises
No they can only recover the amount of the value of the property itself
Do property policies cover the amount of sentimental value
No they only cover the actual financial value
Where a building is damaged what is a normal basis of indemnity
Will be the cost of repair/reconstruction at the time of a loss with a deduction for betterment
What two forms can betterment take
Where are building is repaired the structure can often be renewed so When the work is complete the building is likely to be in better condition than it was before the loss
If the quality of the building is improved in the course of carrying out repairs i.e. an extra story may be added or a sprinkler system installed
What is the indemnity for machinery and equipment
The cost of repair let an allowance for wear and tear
The cost of replacement less wear and tear
What happens for machinery and equipment where there is no ready secondhand market for such property
The insured may be obliged to purchase new equipment and a deduction for betterment would normally be appropriate
What does manufacturers stock genuinely consist of
Raw materials, work in progress and finished stock
What is the measure of indemnity for manufactures stock
It will be what it will cost them at the time and place of a loss to replace the goods or return them to the condition they were in before they were destroyed
Under manufacturers stock how would you be indemnified in the case of raw materials
This will be the replacement cost including delivery to site. In a case of other stock it will be some raw materials costs plus labour and other costs which will be incurred in reproducing the goods before they were lost
How is indemnity based on wholesale and retail stock
The cost at the time of the loss of replacing the stock (i.e. manufacturers or wholesale price) including transport and handling cost to the insured premises
What happens if the replacement cost is higher than the market price for the wholesale and retail stock goods
The market price is likely to be the appropriate basis of indemnity
With livestock and produce what is a normal basis of indemnity
It is a local market price
Under farming stock is the replacement cost the same as the selling price
Yes
What are pecuniary insurances
They cover various types of financial losses and can be contrasted with property insurances
What do pecuniary insurances normally include
B I insurances which cover loss of profit as a result of physical damage
What is the easiest class of insurance to establish the measure of indemnity
Liability insurance
