CHP 8 Flashcards
Purpose of general insurance products
Purpose of this insurance is to indemnify the insured against financial loss due to the insured event. This is to restore the financial position the insured was in before the event.
- Liability insurance
Indemnify the insured against liability due to negligence where the insured is legally liable to pay compensation to a third party. Legal costs relating are also usually covered. Illegal act of negligence will invalidate the cover.
Extent of legal liability may depend on prevailing legislation (marine and aviation – international law, motor and employer liability – national law)
- Liability insurance basic benefit
Basic benefit is to indemnify the insured against financial loss, this could be restricted by:
• Max specified amount per claim or event or on an aggregate max per year.
• An excess, the first part of the claim is paid by the insured.
Subject to details of any reinstatement clause, payment of any benefits may result in cancellation of cover or a further premium.
3.1. Employers’ liability
Indemnifies employers against legal liability to compensate employees.
** this definition is incomplete
3.2. Motor third party liability
Indemnifies motor owners against compensation payable to a third party due to death, injury or damage to property.
In most countries this is compulsory (with or without an upper limit). Cover may or may not be limited to that required by legislation.
3.3. Public liability – often linked to other types of insurance e.g. property, marine etc.
Insured is covered against legal liability for death, injury or damage to a third party not covered by other liability insurance.
3.4. Product liability
Includes faulty design, faulty manufacture, faulty packaging and incorrect or misleading instructions.
3.5. Professional indemnity
Covers the insured against liability resulting from negligence in provision of a service
- Property or damage insurance types
Household contents is frequently written as new for old, irrespective of what age the item is.
- Household and commercial buildings property
- Moveable property
- Motor property
- Marine property
4.2. Moveable property perils
Theft is the major peril.
4.1. Household and commercial buildings property perils
Fire is the principle peril, policies can cover other perils as well (e.g. explosion, lightning, theft, storm, flood)
Damage caused by measures to put out the fire is also covered.
4.3. Motor property perils
Perils: accident or malicious damage to vehicle, fire, theft. Typically this is bundled with third party cover.
4.4. Marine property perils
Perils of the seas, fire, explosion, jettison, piracy.
5.1. Pecuniary loss
Protects insured against bad debts or other failure of a third party. Includes mortgage indemnity guarantee insurance.
5.2. Fidelity guarantee insurance
Covers employers against losses due to dishonest actions by employees. This will also include the costs of sizing the damage.
5.3. Business interruption cover
Indemnifies the insured against losses made due to not being able to do business.
6.1. Personal accident insurance
Usually benefits are fixed amounts in the event that an insured party suffers a loss specified in the contract (e.g. leg).
This is not indemnity because it is not possible to determine the worth of a limb etc. Perils are any event that results in a specified loss (e.g. arm).
6.2. Health insurance
Provides money for medical treatment, thus it is an indemnity insurance. However, only part of the cost may be provided, or benefits may be a fixed amount regardless of actual cost of treatment. Thus health insurance can be included with fixed benefit insurances. Hospital expense plans also exist – pays a fixed amount per day in hospital.
6.3. Unemployment insurance
Provides a lump sum or income replacement (usually no longer than a year), in the event the insured is made redundant.
Purpose is to maintain insured’s lifestyle and pay debts in the short term while looking for employment.
