insurance

Question 1

difference between insurance and guarantee

Answer 1

One difference is that insurance is a direct
agreement between the insurance provider and the
policyholder, while a guarantee involves an indirect agreement
between a beneficiary and a third party, along with the primary
agreement between the principal and beneficiary.
A second difference is that insurance policy calculations are
based on underwriting and possible loss, while a guarantee is
focused strictly on performance or nonperformance. In addition,
insurance providers or policyholders can cancel policies with
notice, while guarantees often cannot be canceled

Question 2

what are the principles of insurance

Answer 2

These are:
1. Principle of Utmost good faith
2. Principle of Insurable interest
3. Principle of Indemnity
4. Principle of Subrogation
5. Principle of Contribution
6. Principle of Proximate cause
7. Principle of Loss of Minimization

Question 3

1. PRINCIPLE OF UBERRIMAE FIDEI
   (UTMOST GOOD FAITH

Answer 3

Both the parties i.e. the insured and the insurer should have a good faith towards each other. Both parties must provide eachother with correct clear information on subject matter.
The insurer’s liability gets void (i.e legally revoked or
cancelled) if any facts, about the subject matter of
insurance are either omitted, hidden, falsified or presented in a wrongmanner by theinsured
*A material fact is one which would have influenced the judgment of a prudent insurer in deciding whether he would accept the risk in whole or in part
and, if so, at what amount of premium

FACTS WHICH MUST BE DISCLOSED:
(i)Facts, which show that a risk represents a greater exposure than would be expected from its nature e.g., the fact that a part of the building is being used for storage of inflammable materials.
(ii) External factors that make the risk greater than normal e.g. the building is located next to a warehouse storing explosive material
(iii) Facts, which would make the amount of loss greater than that normally expected e.g. there is no segregation of hazardous goods from non-hazardous
goods in the storage facility.
(iv) History of Insurance (a) Details of previous losses and claims (b) if any other Insurance Company has earlier declined to insure the property and the special condition imposed by the other insurers; if any.
(v) The existence of other insurances.
(vi) Full facts relating to the description of the subject matter of Insurance.

Question 4

LIC V. Sakunthalabai
AIR 1975 AP 68

Answer 4

Life Insurance Corporation of India (LIC) sought to repudiate a life insurance policy taken out The grounds for repudiation were based on a discrepancy in Jamanadas’ “personal statement.”
In personal statement Jamanadas stated that he had not suffered from any illness and had not consulted any medical practitioner within the last five years.
However, it was later discovered that he had once suffered from indigestion for a few days and had taken a remedy from an Ayurvedic practitioner. LIC said that it was a misrepresentation on his partt that he went to ayurvedic practioner etc and did not disclose but then the reason he died was jaundice. court held jaundice and indigeston are not related at all
- The non-disclosure about the earlier indigestion was inconsequential and did not affect the risk.
LIC was directed to pay the insurance amount with interest
//
Courts recognized that minor inaccuracies should not lead to harsh consequences for the insured’s dependents.

lifeinsurance

Question 5

Rohini Nandan V. Ocean Accident And
Guarantee Corp.
AIR 1960 Cal 696

Answer 5

• fire and burglary insurance taken- and The plaintiff suppressed a previous burglary worth 2000 when obtaining an insurance policy. later he was burgled. the plaintiff’s suppression of the previous burglary fact was significant.
  The non-disclosure invalidated the policy, and the plaintiff forfeited all rights under it.

Question 6

2. PRINCIPLE OF INSURABLE INTEREST
3. Principle of indemnity

Answer 6

The principle of insurable interest states that the person getting insured must have insurable interest in the object of insurance. A person has an insurable
interest when the physical existence of the insured object gives him some gain but its non-existence will give him a loss. In simple words, the insured person must suffer some financial loss by the damage of the
insured object.
//
Indemnity means guarantee or assurance to put the insured in the same position in which he was immediately prior to the happening of the uncertain event. The insurer undertakes to make good the loss.
* It is applicable to fire, marine and other
general insurance.
* Under this the insurer agreed to compensate
the insured for the actual loss suffered

*However, in case of life insurance, the principle of indemnity does not apply because the value of human life cannot be measured in terms of money

Question 7

PRINCIPLE OF SUBROGATION

Answer 7

per this principle after the insured is
compensated for the loss due to damage to property insured, then the right of ownership of such property passes to the insurer. * This principle is corollary of the principle of indemnity and is applicable to all contracts of indemnity. Subrogation means substituting one creditor for
another.

Question 8

PRINCIPLE OF CONTRIBUTION
and PRINCIPLE OF CAUSA PROXIMA

Answer 8

PRINCIPLE OF CONTRIBUTION: if the insured has taken out more than
one policy on the same subject matter.
*According to this principle, the insured can claim the compensation only to the extent of actual loss either from all insurers or from any one insurer.
*If one insurer pays full compensation then that insurer can claim proportionate claim from the other insurers
//
PRINCIPLE OF CAUSA PROXIMA
The loss of insured property can be caused by more than one cause in succession to another.
* The property may be insured against some causes and not against all causes.
* In such an instance, the proximate cause or nearest cause of loss is to be found out

A cargo ship’s base was punctured due to rats and so sea water entered and cargo was damaged. Here there are two causes for the damage of the cargo ship
(i) The cargo ship getting punctured because of rats, and
(ii) The sea water entering ship through puncture.
The risk of sea water is insured but the first cause is not. The nearest cause of damage is sea water which is insured
and therefore the insurer must pay the compensation.
However, in case of life insurance, the principle of
Causa Proxima does not apply. Whatever may be
the reason of death (whether a natural death or
an unnatural death) the insurer is liable to pay
the amount of insurance

Question 9

7. PRINCIPLE
   OF LOSS MINIMIZATION

Answer 9

According to the Principle of Loss Minimization, insured must always try his level best to minimize the loss of his insured property, in case of uncertain
events like a fire outbreak or blast, etc.
*The insured must take all possible measures and necessary steps to control and reduce the losses in such a scenario. The insured must not neglect and
behave irresponsibly during such events just because the property is insured.
*Hence it is a responsibility of the insured to protect his insured property and avoid further losses.
Mr. Arvind’s house is set on fire due to an
electric short-circuit. In this tragic scenario, Mr. Arvind must try his level best to stop fire by all possible means, like first calling nearest fire department office, asking neighbours for emergency fire extinguishers, etc.
He must not remain inactive and watch his house burning hoping, “Why should I worry? I’ve insured
myhouse.

Question 10

what is risk

Answer 10

Risk can be defined in several different ways
 The probability of something happening multiplied by the resulting cost or benefit if it does.
 The probability or threat of quantifiable damage, injury, liability, loss, or any other negative occurrence that is caused by external or internal vulnerabilities, and that may be avoided through preemptive action

Insurable risks:
The risks may be insurable or non-insurable.
I. Risks which are measurable, and which could be pre-estimated in terms of money are insurable.
II. Speculative risk is not insurable as it is not measurable. Speculation in shares, in the rates of commodities, etc., are non-insurable.
Greater risks attract greater premium, Hence, higher premiums are charged in fire insurance for explosives, fire works, highly inflammable substance

Question 11

HARI KISHANDAS V. GUARDIAN ASSURANCE CO.
AIR 1933 ALL 900

Answer 11

He sought insurance for his Steam Roller Flour Mills for a sum of Rs. 7,71,000.
The plaintiff company (Guardian Assurance Company) issued a risk note covering the risk from February 25, 1927, to June 13, 1927.
Contract Formation:
The defendant’s application was received, and the risk was immediately covered.
The plaintiff claimed that the risk was insured during the specified period.
The defendant declined to pay the premium, leading to the cancellation of the contract.
Validity of Contract:
The defendant argued that no valid contract existed due to non-payment of the premium.
However, the court rejected this contention.
Waiver of immediate premium payment is possible, especially in fire insurance cases.
The risk note issued by the plaintiff constituted a valid contract of insurancethe court upheld the validity of the insurance contract despite the non-payment of the premium. The risk note issuance by the plaintiff was sufficient to establish the contract

Question 12

Gray v. Barr

Answer 12

Court will not help a criminal who wants to recover any kind of benefit or
indemnity for his own crime.

Question 13

DURATION OF RISK
Acontract of insurance is incomplete till the duration of the policy is specified.
CASAES?

Answer 13

Issacs v. Royal Insurance Co., South Staffordshire v. Sickness and Accident
Assurance Association, the policy expires at midnight of the last date specified.
It follows that if loss occurs at any time before midnight of the last date specified in the policy, the
insurers are liable.
Commercial Union Assurance Co. v Binjraj Joharmal AIR 1931 Cal 285- It is not unussual to fix the duration of the policy
with reference to the happening of an event

Question 14

HOW IS INDEMNITY PROVIDED?

Answer 14

manner and the choice is entirely of the insurer
1) Cash Payment
2) Repairs
3) Replacement
4) Reinstatement
-Reinstatement as a method of Indemnity is rarely used
because of its inherent difficulties e.g., if the property after restoration fails to meet the specifications of the original in any material way or performance level then the Insurer will be liable to pay damages. Secondly, the expenditure involved
in restoration may be much more than the sum Insured as once they have agreed to reinstate they have to do so irrespective of the cost.

Question 15

Limitations on Insurers Liability

Answer 15

The maximum amount recoverable under any policy is
the sum insured, which is mentioned on the policy. The amount is not the agreed value of the property (except in Valued policies) nor is it the amount, which will be paid automatically on occurrence of loss. What will be paid is the actual loss or sum insured whichever is less.
2. Property Insurance is subjected to the Condition of Average. The underlying principle behind this condition is that Insurers are the trustees of a pool of premiums
from which they meet the losses of the few who suffer damage, so it is reasonable to conclude that every Insured should bring a proper contribution to the pool by way of
premium. Therefore if an insured deliberately or otherwise underinsures his property thus making a lower contribution to the pool, he is not entitled to receive the
full benefits.

The application of this principle makes the insured his own
Insurer to the extent of under-insurance i.e. the pro-rata
difference between the Actual Value and the sum insured.
The amount of loss will be shared between the Insurer and
the insured in the proportion of sum insured and the amount
underinsured. The formula applicable for arriving at the
amount to be paid by the Insurance Co. is
Claim = Loss X (Sum Insured / Market Value)

Question 16

tel me about broken chain/ subsequent cause in insurance

Answer 16

Irrespective of the fact that subsequent causes are covered
or not if it is established that the event starting the chain is a covered peril then claim is payable.

However if reverse were the case and the chain was started
by an excepted or excluded peril then the claim would
not be payable.

In case of the Broken sequence or Interrupted chain of events if the chain of events is started by an Insured peril but interrupted by an excepted or excluded peril then the claim is paid after deducting the damage caused by
the excluded peril.
For example, the burglars enter the
house and leave the gas stove on leading to a fire and the
house is damaged in the fire. The “burglary Insurance” will only pay for the loss due to theft but exclude loss due to fire, which is accepted peril under the burglary policy.
** In case the sequence of events started by an excluded
peril is broken by an Insured peril, as a new and** independent cause then there is a valid claim for even the damage caused by exempted peril. The burglars enter
the house and after carrying out thefts put the house on
fire. The fire policy will pay for the damages due to theft
as well (which is an excluded peril).

4. if the case of loss due to concurrent causes or two or
   more causes occurring simultaneously then **all the causes will have to be Insured perils only then the claim **would
   be payable but even if one of the causes is an excluded
   peril the claim will not be payable

Question 17

what is reinsurance

Answer 17

Through a reinsurance scheme, an insurance company is able to bring together or ‘pool’ its insurance policies
and then divide up the risk among a number of insurance providers so that in the event that a large loss occurs
this will be divided up throughout a number of firms, thereby saving the one insurance company from large
losses.
Insurance and reinsurance are similar in concept in that they are both tools that guard against large losses.
Insurance, on the one hand, is a protection for the individual, whereas reinsurance is the protection taken out by
a large insurance firm to ensure that they survive large losses. The premium that is paid by an individual will be
received by the company that provides the insurance
Whereas the insurance premium paid for reinsurance will be divided among all the insurance companies in the
pool that bear the risk of loss.

Question 18

WHAT IS PREMIUM? and days of grace

Answer 18

Premium is the price for the risk undertaken by the insurers.
In a contract of insurance, the premium for which the insurer agrees to discharge his liability
is the consideration.
It is not necessary that the premium shall be paid in money. Any other consideration which is sufficient to support a legally valid contract can constitute a premium.

DAYS OF GRACE=
The insurers are under no obligation to demand the amount of premium as and when it becomes due
though, in practice, a notice for payment of premium is sent to the insured.
Even if the notice is not received, it is the duty of the insured to pay the premium. Non- receipt of the
notice is not a defence for non-payment of premium.
Generally, there is a stipulation in the policy on their renewal notice that the insured may pay
the renewal premium after the due date of payment and within so may days of grace. if the renewal premium is not paid even during the days of grace, the policy would lapse.

Question 19

sec 50 and sec 113 of insurance act

Answer 19

Section 50 (1)- An insurer shall, 1[before the expiry of three months from the date on which
the premiums in respect of a policy of life insurance were payable but not paid,] give notice to the
policy-holder informing him of the options available to him 2[unless these are set forth in the policy].

Section 113- Acquisition of surrender value by policy.–
(1) A policy of life insurance shall
acquire surrender value as per the norms specified by the regulations.
(2) Every policy of life insurance shall contain the formula as approved by the Authority for
calculation of guaranteed surrender value of the policy

Question 20

alteration of insurance

Answer 20

. In some policies, there may be express conditions relating to the alteration of the risk. Those conditions may prohibit alterations,
(a) absolutely,
(b) without prior notice,
(c) without prior sanction, or
(d) increasing the risk.

Where there is an express absolute prohibition of alteration, any alteration even if trivial would render the policy void.
If the prohibition is in regard to alterations increasing the risk, the alterations which do not increase the risk will not void the policy.
Whether alteration increases or decreases the risk is a question of fact. This must be proved by the insurance company. There may be conditions prohibiting alterations without notice and in such a case mere giving of prior notice is sufficient. On the other hand there may be a prohibitionfrom alteration not only without giving mere notice but without obtaining previous sanction. Then for the continued Validity of the policy, the alteration must be made with prior sanction. Every alteration increasing risk must be sanctioned. Simply because the insurer sanctioned an alteration increasing the risk on a prior occasion, he is not bound to sanction another alteration which increases the original risk though it does not go in excess of the prior sanctioned alteration. Such an increase in risk caused by an alteration also requires a fresh sanction.

Question 21

elements of risk

Answer 21

(A) In Life Insurance :
1. habits in life or mode of living,
2. occupation,
3. environment,
4. heredity,
6. previous illness, and

(B) In Property Insurance :
1. the nature of the property, e.g., movable or immovable or otherwise,
2. character and constitution,
3. area,
4. situation and locality,
5. exposure to outside dangers,
6. inherent defect,
7. use and habit of the assured,
8. the title of the property.

(C) In Marine Insurance :
1. voyage and its nature,
2. the route of the voyage,
3. the winds and storms in the locality,
4. the danger of war, capture and seizure

Question 22

Term policies and Whole life insurance policies

Answer 22

Term policies=
5 to 50 years term, no payment of maturity benefit on the survival. if death during time that policy is active= sum assured is paid to beneficiary - no excessive premium

Whole life insurance policies=
Whole life insurance is a type of life insurance that o ers coverage right until the
death of the policyholder. In this policy, you can opt for either a participating or
non-participating policy, as per your nancial needs and risk appetite. Though
the premiums for participating whole life insurance are higher in comparison,
dividends are paid out at regular intervals to the policyholders. The premium
rates for a non-participating policy are lower, but the policyholder generally
cannot avail the bene ts of regular dividends.

Question 23

Unit Linked Insurance Plan (ULIP)

Answer 23

Unit Linked Insurance Plan or ULIP is a type of life insurance product that o ers
dual bene ts of investment and life insurance. Among the di erent types of life
insurance policies available, ULIPs enjoy a high amount of popularity owing to
their versatile nature. A portion of the premiums paid is directed towards
ensuring insurance coverage, while the rest of the premium is invested into a
bouquet of investment instruments, which can include market-backed equity
funds, debt funds and other securities.
ULIPs are extremely exible instruments since investors can easily switch or
redirect their premiums between the di erent funds available. They are also
touted as having an edge over other market instruments in terms of tax-saving
bene ts, since their proceeds are exempted from LTCG (Long Term Capital Gains)
term= 10-20 years

Question 24

4. Endowment Policy

Answer 24

Endowment Policy is a type of life insurance policy which acts as, both, an
instrument for insurance and saving. These plans aim to provide maturity
bene ts to the life insured, in the form of a lump sum payment at the end of the
policy tenure, even if a claim hasn’t been made. It is the most suitable types of
life insurance for people looking to get maximum coverage alongside having a
sizable savings component. They help the policyholder inculcate the habit of
savings, even while providing nancial security to their family. Endowment plans
can broadly be classi ed into two types: with pro t and without pro t.
Policyholders can choose from these two types based on their risk appetite

TERM: 10 to 35 years

Question 25

Section 45, 38, 39 of the Insurance Act 1938

Answer 25

Section 45:
Title: Policy not to be called in question on ground of mis-statement after two years
After a life insurance policy has been in force for two years, an insurer cannot cancel it or avoid paying a claim due to misstatement or non-disclosure, except in cases of fraud.
The insured’s rights are protected after this period, and the insurer cannot challenge the policy based on earlier statements

Section 38:
Title: Assignment and transfer of insurance policies
A transfer or assignment of a life insurance policy, wholly or in part, must be made by an endorsement on the policy itself or by a separate instrument.
The insurer may accept or decline the transfer based on bona fide reasons, such as public interest or trading of insurance policies.
The transfer or assignment becomes effective upon proper execution and communication to the insurer

Section 39:
Title: Nomination by policy-holder
The policy-holder can nominate the person(s) to whom the money secured by the life insurance policy shall be paid in the event of their death.
Nomination can be made when effecting the policy or before the policy matures for payment.
The insurer must acknowledge the nomination, and the nominee(s) receive the proceeds upon the policy-holder’s death39

Question 26

what is nomitation and who can be a nominee

Answer 26

A nominee is a person who gets the sum assured
as per the terms and conditions of your plan. This is generally a loved one like your spouse, child, parent or a sibling. Nomination refers to the process of picking out a nominee for your plan at the time of purchase.
//
Minor nominee
A lot of parents who are policyholders appoint their children as their nominee. This is a great way to safeguard their future when you may not be around to do so yourself.
However, if your children are below the age of 18, they will be a minor as per law. So, you
would have to appoint a guardian to overlook the affairs of the claim and receive the
proceeds under the policy on behalf of the minor nominee. If your children are below 18 at
the time of settlement, the sum assured will be paid to the guardian/appointee for
safekeeping. The day your children turn 18, the guardian is legally obligated to pay them
the money.

Question 27

suicide and lif insurance

Answer 27

Many life insurance policies contain a suicide clause or provision. Companies typically won’t pay a death benefit if the policyholder
commits suicide within the first one to two years that the policy is in force.
Changing a policy can restart the suicide exclusion period.
Insurance companies may request additional documentation if they
suspect suicide as the cause of death.
Group Life Insurance
Unlike most individual life insurance policies, many
group life policies—the kind
of life insurance people often get through their employers—do not have a
suicide clause. If a covered person dies as a result of suicide, their beneficiaries
typically will receive the death benefit.
[3]
Term Life Insurance
With individual
term life insurance, beneficiaries can claim the death benefit as
long as the exclusion period has ended. If the person dies after the policy has
been in effect for one to two years, the beneficiaries are entitled to the full
benefit. But if the person dies during the exclusion period, the beneficiaries
might receive only the sum of premiums paid to date.

Question 28

sales contracts in marine insurance

Answer 28

1.** Free on Board (F.O.B):** It refers to when the seller of the goods is responsible for the goods till they are boarded on the vessel on seller’s port and thereafter the responsibility lies with the buyer for shipping the goods to his place. The buyer will be the insured here.
2. Cost Insurance and Freight (C.I.F): In this the invoice generated by the buyer includes freight charges i.e. shipping goods to the buyer’s port as well as insurance cost for goods in transit. The seller here does not have responsibility to transport goods from buyer’s country port to the buyer’s address. The seller will be the insured here.
3. **Cost and Freight (C.F): **In this, the invoice includes freight charges and no insurance cost. The
Marine Insurance is purchased by the buyer in this case.
4. Free on Rail (F.O.R): This is similar as free on board but the difference is that it is applicable
for internal trade only and not international trade.

Question 29

type of marine insurance scope

Answer 29

1. Cargo insurance: The word cargo refers to goods and merchandise which are in transit by
sea, road, rail or air. While in transit, there is risk of goods (raw materials, finished goods,
equipment’s, wares) being damaged and thus the need for marine cargo insurance to indemnify the shippers against the financial loss caused due to damage to the cargo.

2. Hull marine insurance:In this type of marine insurance, the subject matter is the vessel and
its equipment. The insurer compensates the insured in case the latter suffers financial loss due to damage or destruction of the vessel or its equipment. The policy covers risk caused due to fire, collision,
sinking, overturning, crew negligence, earthquake, floods, piracy and violent thefts. It does not cover risks due to radioactive damage, war, terrorist’s activities, deliberate damage and insolvency of the ship owner.

3. Freight insurance:It provides protection to vessel owner in case of non-payment of freight
charges due to loss of the cargo. The freight charges are paid to ship owners for transporting
the goods and merchandise safely. In case of payment of freight charges on delivery, the vessel
owner faces the risk in the event cargo is damaged. Thus, here the vessel owner has insurable
interest and purchases freight insurance to cover the risk. It is done on a time basis, certain
freight amount of freight is insured for a 12 month period.
4. Liability insurance: It is an Insurance policy provided to the insured to cover his liabilities
against the third-party contingent to marine accidents or adventures. It will cover accidental
loss of property of the third person as well as the fatal or non-fatal injury to the third party. It can be of two forms:

Question 30

voyage policy, time policy, mixed policy, unvalued policy

Answer 30

1. Voyage policy: It refers to policy issued for a specific passage from departure location to the
destination location. It is applicable where subject matter is the cargo. Here, the risk arises
when the ship leaves the departure port and covers the cargo even when it is located at
intermediate places. Ex. A voyage policy from Bombay port to Hong Kong port.
2. Time policy:As the name implies, the subject matter is covered for a specific period of time which is usually one year. In the case where time has to be extended more than one year, a
Continuation clause is to be added in the contract. It is applicable in case of hull insurance where the vessel is insured while it is navigating or it is being constructed. The vessel can follow any course it wants. They are standard clauses with respect to freight and premium
which are added on to this policy. Ex. A time policy from 1st Jan, 2016 to 1st Jan,2017 .
3. Mixed policy: It is hybrid of Voyage and Time policy where the insurance policy covers risk
during a particular voyage for a specified time period. It is more applicable in case of cargos.
4. Unvalued policy: It refers to that policy where the value of the subject matter is not
mentioned in the contract. The compensation is paid after ascertaining the value of the loss,
where the method to determine the loss is already pre decided and mentioned in the contract.
The value so determined after loss is known as Insurable value or valuable. This policy is also
known as open policy.

Question 31

valued policy, floating policy, single vessel policy, single veessel/fleet pol., named policy

Answer 31

5. Valued policy: It is reverse of the unvalued policy, here the worth of the subject matter is
   ascertained and thus the value of loss to be indemnified is pre decided between the insured and
   the insurer while making the contract and it does not change. The value here is refer as insured
   value or agreed value and it may not be the actual value to be indemnified.
6. Floating policy: This policy is useful for those who have frequent cargos to transport or are
   involved in large scale trade activities. In this policy only the general terms and policy coverage
   amount are specified and other details such as ship name can be subsequently declared. The
   declaration is made when the order is dispatched on the vessel. The sum insured is based on
   previous year turnover or by estimating annual turnover in case of new proposal.
7. Single vessel policy: This policy is for one ship only. A company may have separate policy
   for each of its ship.
8. Fleet or single policy: Here one policy covers fleet of ship; it is preferred by shipping
   companies owning multiple ships.
9. Named policy: This policy is specific in nature where the name of the vessel and the claim
   amount is clearly stated.

Question 32

special declaration pol, annual pol, wager pol, block pol

Answer 32

10. Special declaration policy: This policy is issued to those organizations which have a large
    annual turnover i.e. 3 crores or more. The coverage amount shall be on the previous year
    turnover.
11. Annual policy: As the name suggests it is a policy having duration for one year and cover
    goods belonging to the insured or held in trust by him.
12. Wager Policy: A wager policy is one where there are no fixed terms of reimbursements
    mentioned. If the insurance company finds the damages worth the claim, then the
    reimbursements are provided. Else, there is no compensation offered. Also, it has to be noted
    that a wager policy is not a written insurance policy and as such is not valid in a court of law.
    6
13. Block Policy: Sometimes, a policy is issued to cover both land and sea risks. If the goods
    are sent by rail or by truck to the departure, then it will involve risk on land also.

Question 33

Marine Policy Conditions

Answer 33

The Marine Insurance Act 1906 provides the framework on which marine insurance is based
and the policy document is formulated on the base of marine policy conditions. Based upon
this framework, the insurers are obliged to issue their policies.
* Insurance Cargo Clauses (ICC) (C): The clause provides major casualty coverage
during the land transit and tend to be used for cargoes that are not easily damaged, e.g.
scrap steel, coal, etc. Subject to the policy exclusions and warranties the © covers loss
or damage to the subject matter insured reasonably attributable to
o Fire or explosion
o Grounding, sinking
o Overturning or derailment
o Collision or contact of vessel
o Discharge of cargo at point of distress
* Insurance Cargo Clause (B): Subject to the policy exclusions and warranties, the (B)
clauses provide all the cover under (C) and also cover loss of damage to the subject
matter insured reasonably attributable to:
o Earthquake, volcanic eruption or lightning
o Water damage by entry of sea/ water (excluding rainwater),
o Total loss of package lost overboard
* Institute cargo Clause (A): Subject to the policy exclusions and warranties, the clause
“A” provides the widest of all three covers and generally summed up as ‘all risk’ of
loss or damage to the subject matter insured.

Question 34

what is covered under the fire and allied perils policy

Answer 34

fire, lightning, explosion, implosion- for plant and miachineries, aircraft droppings damage,
Riot, Strike and Malicious Damage (RSMD): Any damage
to the property due to public or strike by employees or
malicious damage (intentional damage) by any person
will be covered under this policy.

Storm, Cyclone, Typhoon, Tempest, Hurricane,
Tornado, Flood and Inundation (STFI):

• Impact Damage: Damage to the property due to impact
  by any Rail / Road vehicle or animal by direct contact,
  but not belonging 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 Rock Slide
• Bursting and/or overflowing of Water Tanks, Apparatus
  and Pipes: If due to bursting or overflowing of water from
  the water tanks installed in the premises of the
  policyholder any damage or loss to the property of the
  policyholder is caused, it will be covered under this policy.
• Missile Testing Operations: Any loss or damage due to
  missile testing by the Govt. or otherwise will be covered
  under this policy
• Leakage from Automatic Sprinkler Installations : In most
  of the organizations as a fire protection measure, automatic
  sprinkler system is installed. If due to non–usage of the
  sprinkler system or otherwise it starts leaking and
  damages the property, then it will be covered under the
  fire insurance policy.
• Bush Fire: It means fire spread from the bushes (small
  fire) but will not include forest fire

Question 35

what are the general exclusions in fire insurance policy

Answer 35

1. avoid small losses.
2. Loss, destruction or damage caused by war, and kindred
perils.
(iii) Loss, destruction or damage directly or indirectly caused
to the insured property by nuclear peril.
(iv) Loss, destruction or damage caused to the insured
property bypollution or contamination
v) Loss, destruction or damage to any electrical and / or
electronic machine, apparatus, fixture or fitting (excluding
fans and electrical wiring in dwellings) arising from or
occasioned by over-running, excessive pressure, short
circuiting, arcing, self-heating or leakage of electricity,
from whatever cause (lightning included).
(vi) Loss of earnings, loss by delay, loss of market or other
consequential or indirect loss or damage of any kind or
disruption whatsoever.
(vii) **Earthquake: **It is not covered under the fire policy but by paying additional premium, the earthquake can be
covered.

Question 36

floater policy fire insurance

Answer 36

to cover the risks of
stocks at various locations under one sum insured an
additional premium can be paid. Example: A person is
having two godowns at Delhi and the value of stock is Rs
50 lakhs and he is not having the value at each location
then he can insure the stock under floating policy by
paying an additional premium.

Question 37

declaration policy

Answer 37

This type of policy is useful where there is frequent
fluctuations in stocks / stock values and to avoid the under
insurance ( insurance of lower value) of the stock,
Declaration Policy(ies) can be granted subject to the
following conditions:
a) The minimum sum insured shall be Rs. l crore.
(b) Monthly declarations based on the average of the highest
value at risk on each day or highest value on any day of
the month shall be submitted by the Insured latest by
the last day of the succeeding month.
(c) Reduction in sum insured shall not be allowed under
any circumstances.
(d) Refund of premium on adjustment based on the
declarations / cancellations shall not exceed 50% of the
total premium.
(e) The basis of value for declaration shall be the Market
Value unless otherwise agreed to between insurer and
insured.
//
It is not permissible to issue declaration policy in respect
of:
1. Insurance required for a short period
2. Stocks under going process
3. stocks at Railway sidings

Question 38

types of motor vehicle insurance policies

Answer 38

(i) Liability Only Policy: This covers Third Party Liability for bodily injury
and/ or death and Property Damage. Personal Accident Cover for Owner Driver is also included. This policy is also known as ACT only policy etc.
(ii) Package Policy (Comprehensive): This covers loss or damage to the
vehicle insured in addition to (i) above.

Question 39

Comprehensive (Package) Car insurance policy inclusions and exclusion

Answer 39

This type of insurance covers all the risks covered in the Motor Vehicles Act plus
loss or damage caused to the vehicle:
by fire, explosion, self-ignition or lightning;
 by burglary, housebreaking or theft;
 by riot and strike;
 by earthquake (fire and shock damage);
 by flood typhoon hurricane storm tempest inundation cyclone
hailstorm frost;
 by accidental external means;
 by malicious act;
 by terrorist activity;
 whilst in transit by road rail inland-waterway lift elevator or air;
 by landslide rockslide.
 Personal Accident Cover -Coverage of ` 2 lakhs for the individual driver
of the vehicle while travelling, mounting or dismounting from the car.
Optional personal accident covers for co-passengers are also available.

Exclusions
The Comprehensive Insurance policy excludes the loss or damage caused due to:
 Normal wear and tear
Mechanical/ electrical breakdown
 Loss/ damage due to war, mutiny or nuclear risk
 Damage to/ by a person driving any vehicles or cars without a valid license
 Damage to/ by a person driving the vehicle under the influence of drugs or
liquor
 Driving the vehicle against the limitations as to use.

Question 40

what is insured declared value

Answer 40

Each car is insured at a fixed value which is termed as the Insured’s Declared
Value (IDV).
IDV is calculated based on the manufacturer’s listed selling price of the vehicle plus the listed price of any accessories after deducting the depreciation for every year as provided by the Indian Motor Tariff.
If the price of any electrical and / or electronic item installed in the vehicle is not included in the manufacturer’s listed selling price, then the actual value (after
depreciation) of this item can be added to the sum insured over and above the IDV.
In case of vehicles fitted with bi-fuel system such as petrol/diesel and CNG/LPG, is to be
insured separately at an additional premium of 4% on the value of such kit. You
need to specifically declare this in the proposal form.

Question 41

third party legal liability

Answer 41

Protection against legal liability due to accidental
damages resulting in the permanent injury or death of a person, and damage
caused to the surrounding property. when a vehicle is transferred, the new owner chooses to obtain
third-party liability cover from another insurer, they can cancel the existing third
party liability cover which was transferred automatically, provided that proof of
the new insurance cover is shown to the previous insurer. In addition to long-term
motor cover, the foregoing clarification also applies for one-year comprehensive
and standalone third-party liability motor insurance policies.

Question 42

Motor Vehicle Amendment Act

Answer 42

1. The Amendment Act instructs the central government to create a special motor vehicle accident fund to provide compulsory vehicle insurance to road users- used for treating victims, compensation etc
2. empowers the central government to prescribe rules
   for providing the minimum premium and maximum liability of insurers in consultation with the IRDAI.
3. Victims have been provided with the option to approach insurers directly for pursuing their claim. Insurers, on receipt of information of an accident from a claimant or on submission of an accident report, insurer must make an offer within 30 days before the motor accident claims tribunal - if claimant accepts- insurer to make payment within the next 30 days
4. insurer may deny 3rd party liability if driver has no license / insured has not paid the insurance premium
5. Insurers must provide for the cashless treatment of road accident victims,
   including during the ‘golden hour’ (ie, the one-hour period immediately
   following an injury).

Question 43

own damage and ncb

Answer 43

NCB is a discount given by insurers on the subsequent policy premium. Some important things to note about No Claim Bonus are: The discount starts at 20% and increases up to 50% based on the consecutive claim-free years. NCB is applicable only to the own damage premium and not on third-party premiums.

Question 44

health insurance during covid

Answer 44

a. General and Health Insurers were asked to devise comprehensive health insurance policies2 in
order to enable all employers and organisations to comply with the directions issued under the
Ministry of Home Affairs’ Order of 15 April 2020 regarding the containment of the COVID-19
pandemic and extension of lockdown measures.

b. Insurers were allowed to offer COVID-19 related short-term health insurance policies until
March 20213
.
c. Subsequently, in July 2020, General and Health Insurers were directed to mandatorily offer
standardised individual health insurance products covering COVID-19, namely Corona
Rakshak product4 and Corona Kavach product5.

–
. Settlement of COVID-19 related claims26 (including hospitalization treatment and use of make shift or temporary hospitals27) and provision of cashless facilities28;

Maintenance of business continuity plan and role of crisis management committee in
monitoring the current situation on a real time basis30;

g. Rescheduling of payments under term loans31 and collection of premium in instalments32; and

h. Relaxation of timelines for grace period,regulatory filings, public disclosures, and other
compliance36
.

Question 45

Ratan Lal and anr. Vs. Metropolitan Insurance Co. Ltd

Answer 45

Pyare Lal had applied for an insurance policy with the respondent company, Metropolitan Insurance Co. Ltd., to insure his life for a sum of Rs. 10,000/- on a twenty-year endowment basis.
The company accepted his proposal, and a policy was issued.
/
His life was found to be a first-class life after a medical examination by the company’s doctor.
The company issued a receipt for the premium amount and an acceptance letter for the assurance.

he later died of an illness which had set in a few days prior to the acceptance of life insurance policy by co.. however, ratan lal was only made aware of his illness AFTER the insurance company had accepted the insurance.
he believed it to be a normal disorder, not a life threatening illness. so. its ok because continued disclosure is not necessary. application ubrema fide was used and the nsured had in good faith disclosed whatver he was aware of at the time when asked. so life insurance must be given
//
This case places a distinction between the fact of ordinary disorder and the
material change in health of the insured which could be made ground of repudiation by
the company and its important to make this distinction clear as it may lead to graveinjustice to the insured. Ordinary disorder if doesn’t lead to deterioration of health of the
deceased then would not amount to suppression of material fact.

Question 46

Jacob Punnen & Anr. vs. United India Insurance

Answer 46

The policy was renewed annually, and the last renewal was done on March 28, 2007, for a year (till March 27, 2008).
Before the policy’s expiry, the insurer sent a reminder to the appellants to renew their policy, along with the premium amount.- BRO RENEWED IT.
later he got an angioplasty and the insurance did not abide by the previous coverage stipulations and stated that due to the change in policy- they will not be covering the enitre cost of the angio.
it was argued by bro that since they said it was a reneweal of policy it obv means a continuaton of previous policy so how can u suddenly change th eterms? specially without active disclosure

//
thus: The Supreme Court held that the insurer’s reminder for renewal created a binding obligation.
The insurer could not unilaterally alter terms after renewal.
The receipt confirmed the policy period and coverage.

Question 47

Liberty National Life Insurance Company v. Weldon

Answer 47

This is a suit by Gaston Weldon, who sues as the father of Shirley Dianne Weldon, deceased, his minor daughter. for wrongful death
Prior to Shirley’s death on May 1, 1952 (when she was approximately two and a half years old), each of the 3 defendant insurance companies had issued a policy insuring Shirley’s life withMrs. Earle Dennisons, Shirley’s aunt-in-law (widow of a brother of Shirley’s mother), applied for these policies.
Each policy provided that the death benefits would be paid to Mrs. Dennison.
The Southern Life policy also listed Shirley’s mother as a contingent beneficiary.
//
The theory on which plaintiff seeks to recover damages from the defendants is that Mrs. Dennison had no insurable interest in Shirley’s life and that the defendants knew or should have known that fact; and, that by reason of the wrongful and negligent issuance of the “illegal” policies of insurance Mrs. Dennison murdered Shirley with the hope of collecting the insurance proceeds.
/
The court ruled that Mrs. Earle Dennison (Shirley Dianne Weldon’s aunt-in-law) had no insurable interest in Shirley’s life. Despite the issuance of insurance policies, the court held that Mrs. Dennison’s lack of insurable interest rendered the policies invalid. The case underscores the importance of verifying insurable interest before issuing insurance policies

Question 48

The followings are the
characteristics of Insurance Contract

Answer 48

Aleatory Contract (Dependent on Chance): The insurance contract is fully
dependent on chances. It means that, if the loss arises, compensation is paid by the
insurer on the occurrence of peril. If it does not occur Insurer does not pay any
compensation while the premium gets paid to the insurer.
* Conditional Contract: Insurance contracts laydown conditions like providing proof
of insurable interest, immediate communication of loss, proof of loss and payment of
premium by the insured.
* Contract of Adhesion (Strong attachment to Causes): Legally obligatory on the
part of the insurer to explain the terms of the contract fully to all the parties. This is
particularly important as under contract of adhesion, any ambiguity in the wording of
the agreement will be interpreted against the insurer as he had laid down the terms.
* Unilateral Contract: Insurer is the only party to the contract who makes promises
that can be legally enforced

Question 49

Risk is broadly classified into two categories:

Answer 49

Pure risk and Speculative risk.
❖ A speculative risk is a risk that accompanies the possibility of earning a profit. Most
business decisions, such as the decision to market a new product, involve speculative
risks. If the new product succeeds in the marketplace, there are profits; if it fails, there
are losses. For example, PepsiCo repeatedly gambles on the introduction of new
products to compete with Coca-Cola and reach the elusive top spot. But the gamble
does not pay off when the product fizzles.
❖ A pure risk is a risk that involves only the possibility of loss, with no potential for
gain. The possibility of damage due to hurricane, fire, or automobile accident is a pure
risk because there is no gain if such damage does not occur. Another pure risk is the
risk of large medical bills resulting from a serious illness. Again, if there is no illness,
there is no monetary gain.

Question 50

South British Insurance Co Ltd. v. J.R Stenson

Answer 50

Facts
A proposal was made to an insurance company for an insurance of the defendant’s motor car.
In the proposal form there was no express agreement to pay the premium and a condition in
the policy provided that “no insurance shall he held to be effected until the premium due
thereon shall he paid and accepted in full.” A policy was issued to the insured and retained by
him. Repeated demands were made by the company for the Premium and the defendant
informed the company that he might have to cancel the insurance. The company having sued
for non-payment of premium.
Held, that the insurance company was not entitled to sue the defendant as under the terms of
the policy the contract could not be said to be complete until the premium was paid and
accepted, and that the handing over of the policy containing the proviso did not amount to a
waiver of the condition.
❖ The risk commences from the date of issue. Generally, however, there is a provision
in the policy that it will come into force only on the receipt of premium.
❖ In life policies, particularly, there is a limitation that the risk will not attach till the
first premium is paid.

Question 51

Trunder Anderson and Company v. Thames and Mersey Marine Insurance Comapany,

Answer 51

The insurers are liable even if the loss is caused wilfully or maliciously by the
servants of the assured or strangers.
✓ It makes no difference if the act of the servant or strangers is negligent to the point of
being culpable.

Question 52

Pim v Reid

Answer 52

certain premises were insured and the buildings were used for paper
manufacture. Subsequently, large quantities of cotton waste were brought into the
building The building was destroyed by fire. The insurance company argued that the
cotton waste increased the risk and so they were not liable. But the court rejected the contention and
it was held that in the absence of fraud, such an alteration will not
affect the policy unless there is a condition in the policy.

Question 53

Glickman v lancashire

Answer 53

non disclosure of material facts by active concealment - insurance company can deny claim

Question 55

Nirmala reddy v LIC

Answer 55

nominee should be immediate family or legal heirs if nominee is a 3rd party then the claim should still go to legal heirs